Correlation Between CSL and NMI Holdings
Can any of the company-specific risk be diversified away by investing in both CSL 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 CSL and NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSL Limited and NMI Holdings, you can compare the effects of market volatilities on CSL 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 CSL with a short position of NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSL and NMI Holdings.
Diversification Opportunities for CSL and NMI Holdings
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CSL and NMI is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding CSL Limited and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and CSL 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 CSL Limited 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 CSL i.e., CSL and NMI Holdings go up and down completely randomly.
Pair Corralation between CSL and NMI Holdings
Assuming the 90 days horizon CSL is expected to generate 4.29 times less return on investment than NMI Holdings. But when comparing it to its historical volatility, CSL Limited is 1.25 times less risky than NMI Holdings. It trades about 0.03 of its potential returns per unit of risk. NMI Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,940 in NMI Holdings on August 28, 2024 and sell it today you would earn a total of 700.00 from holding NMI Holdings or generate 23.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.22% |
| Values | Daily Returns |
CSL Limited vs. NMI Holdings
Performance |
| Timeline |
| CSL Limited |
| NMI Holdings |
CSL and NMI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSL and NMI Holdings
The main advantage of trading using opposite CSL and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSL 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.| CSL vs. Superior Plus Corp | CSL vs. NMI Holdings | CSL vs. Origin Agritech | CSL vs. SIVERS SEMICONDUCTORS AB |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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