Correlation Between MBIA and NMI Holdings
Can any of the company-specific risk be diversified away by investing in both MBIA 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 MBIA and NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MBIA Inc and NMI Holdings, you can compare the effects of market volatilities on MBIA 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 MBIA with a short position of NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of MBIA and NMI Holdings.
Diversification Opportunities for MBIA and NMI Holdings
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MBIA and NMI is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding MBIA Inc and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and MBIA 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 MBIA Inc 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 MBIA i.e., MBIA and NMI Holdings go up and down completely randomly.
Pair Corralation between MBIA and NMI Holdings
Considering the 90-day investment horizon MBIA is expected to generate 1.42 times less return on investment than NMI Holdings. In addition to that, MBIA is 2.45 times more volatile than NMI Holdings. It trades about 0.03 of its total potential returns per unit of risk. NMI Holdings is currently generating about 0.1 per unit of volatility. If you would invest 3,008 in NMI Holdings on August 27, 2024 and sell it today you would earn a total of 865.00 from holding NMI Holdings or generate 28.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MBIA Inc vs. NMI Holdings
Performance |
| Timeline |
| MBIA Inc |
| NMI Holdings |
MBIA and NMI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MBIA and NMI Holdings
The main advantage of trading using opposite MBIA and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MBIA 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.The idea behind MBIA Inc and NMI Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| NMI Holdings vs. MGIC Investment Corp | NMI Holdings vs. Employers Holdings | NMI Holdings vs. James River Group | NMI Holdings vs. ICC Holdings |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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