Correlation Between Lowes Companies and NMI Holdings
Can any of the company-specific risk be diversified away by investing in both Lowes Companies 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 Lowes Companies and NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lowes Companies and NMI Holdings, you can compare the effects of market volatilities on Lowes Companies 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 Lowes Companies with a short position of NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lowes Companies and NMI Holdings.
Diversification Opportunities for Lowes Companies and NMI Holdings
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lowes and NMI is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Lowes Companies and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and Lowes Companies 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 Lowes Companies 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 Lowes Companies i.e., Lowes Companies and NMI Holdings go up and down completely randomly.
Pair Corralation between Lowes Companies and NMI Holdings
Assuming the 90 days horizon Lowes Companies is expected to generate 1.17 times less return on investment than NMI Holdings. In addition to that, Lowes Companies is 1.09 times more volatile than NMI Holdings. It trades about 0.06 of its total potential returns per unit of risk. NMI Holdings is currently generating about 0.08 per unit of volatility. If you would invest 2,600 in NMI Holdings on September 12, 2024 and sell it today you would earn a total of 1,100 from holding NMI Holdings or generate 42.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lowes Companies vs. NMI Holdings
Performance |
| Timeline |
| Lowes Companies |
| NMI Holdings |
Lowes Companies and NMI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lowes Companies and NMI Holdings
The main advantage of trading using opposite Lowes Companies and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lowes Companies 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.| Lowes Companies vs. Sumitomo Rubber Industries | Lowes Companies vs. Vulcan Materials | Lowes Companies vs. LION ONE METALS | Lowes Companies vs. APPLIED MATERIALS |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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