Correlation Between Sterling Construction and NMI Holdings
Can any of the company-specific risk be diversified away by investing in both Sterling Construction 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 Sterling Construction and NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and NMI Holdings, you can compare the effects of market volatilities on Sterling Construction 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 Sterling Construction with a short position of NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and NMI Holdings.
Diversification Opportunities for Sterling Construction and NMI Holdings
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Sterling and NMI is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and Sterling Construction 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 Sterling Construction 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 Sterling Construction i.e., Sterling Construction and NMI Holdings go up and down completely randomly.
Pair Corralation between Sterling Construction and NMI Holdings
Assuming the 90 days horizon Sterling Construction is expected to under-perform the NMI Holdings. In addition to that, Sterling Construction is 1.52 times more volatile than NMI Holdings. It trades about -0.04 of its total potential returns per unit of risk. NMI Holdings is currently generating about -0.01 per unit of volatility. If you would invest 3,560 in NMI Holdings on September 13, 2024 and sell it today you would lose (20.00) from holding NMI Holdings or give up 0.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sterling Construction vs. NMI Holdings
Performance |
| Timeline |
| Sterling Construction |
| NMI Holdings |
Sterling Construction and NMI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and NMI Holdings
The main advantage of trading using opposite Sterling Construction and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction 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.| Sterling Construction vs. Superior Plus Corp | Sterling Construction vs. SIVERS SEMICONDUCTORS AB | Sterling Construction vs. Norsk Hydro ASA | Sterling Construction vs. Reliance Steel Aluminum |
| NMI Holdings vs. JJ SNACK FOODS | NMI Holdings vs. Tradegate AG Wertpapierhandelsbank | NMI Holdings vs. JSC Halyk bank | NMI Holdings vs. VARIOUS EATERIES LS |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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