Correlation Between NMI Holdings and MBIA
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and MBIA 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 NMI Holdings and MBIA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and MBIA Inc, you can compare the effects of market volatilities on NMI Holdings and MBIA 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 NMI Holdings with a short position of MBIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and MBIA.
Diversification Opportunities for NMI Holdings and MBIA
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NMI and MBIA is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and MBIA Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MBIA Inc and NMI Holdings 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 NMI Holdings are associated (or correlated) with MBIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MBIA Inc has no effect on the direction of NMI Holdings i.e., NMI Holdings and MBIA go up and down completely randomly.
Pair Corralation between NMI Holdings and MBIA
Given the investment horizon of 90 days NMI Holdings is expected to generate 1.38 times less return on investment than MBIA. But when comparing it to its historical volatility, NMI Holdings is 2.6 times less risky than MBIA. It trades about 0.1 of its potential returns per unit of risk. MBIA Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 562.00 in MBIA Inc on August 24, 2024 and sell it today you would earn a total of 96.00 from holding MBIA Inc or generate 17.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
NMI Holdings vs. MBIA Inc
Performance |
| Timeline |
| NMI Holdings |
| MBIA Inc |
NMI Holdings and MBIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NMI Holdings and MBIA
The main advantage of trading using opposite NMI Holdings and MBIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, MBIA 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 MBIA will offset losses from the drop in MBIA's long position.| 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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