Correlation Between Applied Materials and NMI Holdings
Can any of the company-specific risk be diversified away by investing in both Applied Materials 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 Applied Materials and NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and NMI Holdings, you can compare the effects of market volatilities on Applied Materials 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 Applied Materials with a short position of NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and NMI Holdings.
Diversification Opportunities for Applied Materials and NMI Holdings
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Applied and NMI is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and Applied Materials 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 Applied Materials 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 Applied Materials i.e., Applied Materials and NMI Holdings go up and down completely randomly.
Pair Corralation between Applied Materials and NMI Holdings
Assuming the 90 days horizon Applied Materials is expected to under-perform the NMI Holdings. In addition to that, Applied Materials is 1.25 times more volatile than NMI Holdings. It trades about -0.02 of its total potential returns per unit of risk. NMI Holdings is currently generating about 0.04 per unit of volatility. If you would invest 3,580 in NMI Holdings on August 28, 2024 and sell it today you would earn a total of 60.00 from holding NMI Holdings or generate 1.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. NMI Holdings
Performance |
| Timeline |
| Applied Materials |
| NMI Holdings |
Applied Materials and NMI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and NMI Holdings
The main advantage of trading using opposite Applied Materials and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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.| Applied Materials vs. Superior Plus Corp | Applied Materials vs. NMI Holdings | Applied Materials vs. Origin Agritech | Applied Materials vs. SIVERS SEMICONDUCTORS AB |
| NMI Holdings vs. CSSC Offshore Marine | NMI Holdings vs. SIEM OFFSHORE NEW | NMI Holdings vs. PARKEN Sport Entertainment | NMI Holdings vs. SK TELECOM TDADR |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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