Correlation Between Rocket Internet and NMI Holdings
Can any of the company-specific risk be diversified away by investing in both Rocket Internet 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 Rocket Internet and NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rocket Internet SE and NMI Holdings, you can compare the effects of market volatilities on Rocket Internet 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 Rocket Internet with a short position of NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocket Internet and NMI Holdings.
Diversification Opportunities for Rocket Internet and NMI Holdings
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Rocket and NMI is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Internet SE and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and Rocket Internet 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 Rocket Internet SE 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 Rocket Internet i.e., Rocket Internet and NMI Holdings go up and down completely randomly.
Pair Corralation between Rocket Internet and NMI Holdings
Assuming the 90 days trading horizon Rocket Internet SE is expected to under-perform the NMI Holdings. In addition to that, Rocket Internet is 1.1 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 0.09 per unit of volatility. If you would invest 1,900 in NMI Holdings on September 3, 2024 and sell it today you would earn a total of 1,860 from holding NMI Holdings or generate 97.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rocket Internet SE vs. NMI Holdings
Performance |
| Timeline |
| Rocket Internet SE |
| NMI Holdings |
Rocket Internet and NMI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rocket Internet and NMI Holdings
The main advantage of trading using opposite Rocket Internet and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocket Internet 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 effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Rocket Internet as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Rocket Internet's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Rocket Internet's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Rocket Internet SE.
| NMI Holdings vs. Harmony Gold Mining | NMI Holdings vs. WT OFFSHORE | NMI Holdings vs. Luckin Coffee | NMI Holdings vs. BJs Restaurants |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges |