Correlation Between American Eagle and NMI Holdings
Can any of the company-specific risk be diversified away by investing in both American Eagle 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 American Eagle and NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Eagle Outfitters and NMI Holdings, you can compare the effects of market volatilities on American Eagle 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 American Eagle with a short position of NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and NMI Holdings.
Diversification Opportunities for American Eagle and NMI Holdings
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and NMI is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and American Eagle 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 American Eagle Outfitters 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 American Eagle i.e., American Eagle and NMI Holdings go up and down completely randomly.
Pair Corralation between American Eagle and NMI Holdings
Assuming the 90 days horizon American Eagle Outfitters is expected to under-perform the NMI Holdings. In addition to that, American Eagle is 1.52 times more volatile than NMI Holdings. It trades about -0.03 of its total potential returns per unit of risk. NMI Holdings is currently generating about 0.11 per unit of volatility. If you would invest 3,060 in NMI Holdings on September 1, 2024 and sell it today you would earn a total of 720.00 from holding NMI Holdings or generate 23.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. NMI Holdings
Performance |
| Timeline |
| American Eagle Outfitters |
| NMI Holdings |
American Eagle and NMI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and NMI Holdings
The main advantage of trading using opposite American Eagle and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle 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.| American Eagle vs. Superior Plus Corp | American Eagle vs. Origin Agritech | American Eagle vs. Identiv | American Eagle vs. INTUITIVE SURGICAL |
| NMI Holdings vs. KIMBALL ELECTRONICS | NMI Holdings vs. UET United Electronic | NMI Holdings vs. BYD ELECTRONIC | NMI Holdings vs. Benchmark Electronics |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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