Correlation Between Fairfax Financial and NMI Holdings
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial 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 Fairfax Financial and NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fairfax Financial Holdings and NMI Holdings, you can compare the effects of market volatilities on Fairfax Financial 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 Fairfax Financial with a short position of NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and NMI Holdings.
Diversification Opportunities for Fairfax Financial and NMI Holdings
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fairfax and NMI is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and Fairfax Financial 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 Fairfax Financial Holdings 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 Fairfax Financial i.e., Fairfax Financial and NMI Holdings go up and down completely randomly.
Pair Corralation between Fairfax Financial and NMI Holdings
Assuming the 90 days horizon Fairfax Financial Holdings is expected to generate 1.05 times more return on investment than NMI Holdings. However, Fairfax Financial is 1.05 times more volatile than NMI Holdings. It trades about 0.29 of its potential returns per unit of risk. NMI Holdings is currently generating about 0.05 per unit of risk. If you would invest 116,800 in Fairfax Financial Holdings on August 28, 2024 and sell it today you would earn a total of 18,000 from holding Fairfax Financial Holdings or generate 15.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. NMI Holdings
Performance |
| Timeline |
| Fairfax Financial |
| NMI Holdings |
Fairfax Financial and NMI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and NMI Holdings
The main advantage of trading using opposite Fairfax Financial and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial 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.| Fairfax Financial vs. Cal Maine Foods | Fairfax Financial vs. Lifeway Foods | Fairfax Financial vs. Austevoll Seafood ASA | Fairfax Financial vs. MGIC INVESTMENT |
| NMI Holdings vs. Lion Biotechnologies | NMI Holdings vs. Digilife Technologies Limited | NMI Holdings vs. Food Life Companies | NMI Holdings vs. CONAGRA FOODS |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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