Correlation Between British American and NMI Holdings
Can any of the company-specific risk be diversified away by investing in both British American 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 British American and NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and NMI Holdings, you can compare the effects of market volatilities on British American 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 British American with a short position of NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and NMI Holdings.
Diversification Opportunities for British American and NMI Holdings
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between British and NMI is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and British American 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 British American Tobacco 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 British American i.e., British American and NMI Holdings go up and down completely randomly.
Pair Corralation between British American and NMI Holdings
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.65 times more return on investment than NMI Holdings. However, British American Tobacco is 1.53 times less risky than NMI Holdings. It trades about 0.2 of its potential returns per unit of risk. NMI Holdings is currently generating about 0.11 per unit of risk. If you would invest 2,767 in British American Tobacco on September 1, 2024 and sell it today you would earn a total of 828.00 from holding British American Tobacco or generate 29.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. NMI Holdings
Performance |
| Timeline |
| British American Tobacco |
| NMI Holdings |
British American and NMI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and NMI Holdings
The main advantage of trading using opposite British American and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American 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.| British American vs. Air Transport Services | British American vs. Corporate Office Properties | British American vs. Columbia Sportswear | British American vs. Ming Le Sports |
| 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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