Correlation Between Snam SpA and NMI Holdings
Can any of the company-specific risk be diversified away by investing in both Snam SpA 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 Snam SpA and NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snam SpA and NMI Holdings, you can compare the effects of market volatilities on Snam SpA 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 Snam SpA with a short position of NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snam SpA and NMI Holdings.
Diversification Opportunities for Snam SpA and NMI Holdings
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Snam and NMI is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Snam SpA and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and Snam SpA 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 Snam SpA 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 Snam SpA i.e., Snam SpA and NMI Holdings go up and down completely randomly.
Pair Corralation between Snam SpA and NMI Holdings
Assuming the 90 days horizon Snam SpA is expected to under-perform the NMI Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Snam SpA is 2.32 times less risky than NMI Holdings. The stock trades about -0.14 of its potential returns per unit of risk. The NMI Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,580 in NMI Holdings on August 28, 2024 and sell it today you would earn a total of 60.00 from holding NMI Holdings or generate 1.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Snam SpA vs. NMI Holdings
Performance |
| Timeline |
| Snam SpA |
| NMI Holdings |
Snam SpA and NMI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snam SpA and NMI Holdings
The main advantage of trading using opposite Snam SpA and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snam SpA 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.| Snam SpA vs. Superior Plus Corp | Snam SpA vs. NMI Holdings | Snam SpA vs. Origin Agritech | Snam SpA vs. SIVERS SEMICONDUCTORS AB |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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