Correlation Between Aqua America and NMI Holdings
Can any of the company-specific risk be diversified away by investing in both Aqua America and NMI Holdings at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Aqua America and NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aqua America and NMI Holdings, you can compare the effects of market volatilities on Aqua America and NMI Holdings and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Aqua America with a short position of NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqua America and NMI Holdings.
Diversification Opportunities for Aqua America and NMI Holdings
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Aqua and NMI is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Aqua America and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and Aqua America is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Aqua America are associated (or correlated) with NMI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMI Holdings has no effect on the direction of Aqua America i.e., Aqua America and NMI Holdings go up and down completely randomly.
Pair Corralation between Aqua America and NMI Holdings
Assuming the 90 days horizon Aqua America is expected to generate 0.79 times more return on investment than NMI Holdings. However, Aqua America is 1.27 times less risky than NMI Holdings. It trades about 0.18 of its potential returns per unit of risk. NMI Holdings is currently generating about 0.13 per unit of risk. If you would invest 3,512 in Aqua America on September 2, 2024 and sell it today you would earn a total of 252.00 from holding Aqua America or generate 7.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aqua America vs. NMI Holdings
Performance |
| Timeline |
| Aqua America |
| NMI Holdings |
Aqua America and NMI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aqua America and NMI Holdings
The main advantage of trading using opposite Aqua America and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqua America position performs unexpectedly, NMI Holdings can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in NMI Holdings will offset losses from the drop in NMI Holdings' long position.| Aqua America vs. STMicroelectronics NV | Aqua America vs. Elmos Semiconductor SE | Aqua America vs. Arrow Electronics | Aqua America vs. Meiko Electronics Co |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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