Correlation Between S A P and NMI Holdings
Can any of the company-specific risk be diversified away by investing in both S A P 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 S A P and NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAP SE and NMI Holdings, you can compare the effects of market volatilities on S A P 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 S A P with a short position of NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and NMI Holdings.
Diversification Opportunities for S A P and NMI Holdings
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SAP and NMI is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and S A P 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 SAP 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 S A P i.e., S A P and NMI Holdings go up and down completely randomly.
Pair Corralation between S A P and NMI Holdings
Assuming the 90 days trading horizon S A P is expected to generate 1.27 times less return on investment than NMI Holdings. But when comparing it to its historical volatility, SAP SE is 1.95 times less risky than NMI Holdings. It trades about 0.18 of its potential returns per unit of risk. NMI Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3,580 in NMI Holdings on September 1, 2024 and sell it today you would earn a total of 200.00 from holding NMI Holdings or generate 5.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SAP SE vs. NMI Holdings
Performance |
| Timeline |
| SAP SE |
| NMI Holdings |
S A P and NMI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and NMI Holdings
The main advantage of trading using opposite S A P and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P 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 SAP SE 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. KIMBALL ELECTRONICS | NMI Holdings vs. UET United Electronic | NMI Holdings vs. BYD ELECTRONIC | NMI Holdings vs. Benchmark Electronics |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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