Correlation Between HK Electric and NMI Holdings
Can any of the company-specific risk be diversified away by investing in both HK Electric 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 HK Electric and NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HK Electric Investments and NMI Holdings, you can compare the effects of market volatilities on HK Electric 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 HK Electric with a short position of NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and NMI Holdings.
Diversification Opportunities for HK Electric and NMI Holdings
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HKT and NMI is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and HK Electric 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 HK Electric Investments 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 HK Electric i.e., HK Electric and NMI Holdings go up and down completely randomly.
Pair Corralation between HK Electric and NMI Holdings
Assuming the 90 days trading horizon HK Electric is expected to generate 45.7 times less return on investment than NMI Holdings. But when comparing it to its historical volatility, HK Electric Investments is 2.75 times less risky than NMI Holdings. It trades about 0.0 of its potential returns per unit of risk. NMI Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,580 in NMI Holdings on August 29, 2024 and sell it today you would earn a total of 100.00 from holding NMI Holdings or generate 2.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
HK Electric Investments vs. NMI Holdings
Performance |
| Timeline |
| HK Electric Investments |
| NMI Holdings |
HK Electric and NMI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HK Electric and NMI Holdings
The main advantage of trading using opposite HK Electric and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Electric 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.| HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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