Correlation Between Westlake Chemical and NMI Holdings
Can any of the company-specific risk be diversified away by investing in both Westlake Chemical 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 Westlake Chemical and NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westlake Chemical and NMI Holdings, you can compare the effects of market volatilities on Westlake Chemical 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 Westlake Chemical with a short position of NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westlake Chemical and NMI Holdings.
Diversification Opportunities for Westlake Chemical and NMI Holdings
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Westlake and NMI is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Westlake Chemical and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and Westlake Chemical 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 Westlake Chemical 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 Westlake Chemical i.e., Westlake Chemical and NMI Holdings go up and down completely randomly.
Pair Corralation between Westlake Chemical and NMI Holdings
Assuming the 90 days horizon Westlake Chemical is expected to generate 2.74 times less return on investment than NMI Holdings. In addition to that, Westlake Chemical 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 1,880 in NMI Holdings on September 4, 2024 and sell it today you would earn a total of 1,880 from holding NMI Holdings or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Westlake Chemical vs. NMI Holdings
Performance |
| Timeline |
| Westlake Chemical |
| NMI Holdings |
Westlake Chemical and NMI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westlake Chemical and NMI Holdings
The main advantage of trading using opposite Westlake Chemical and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westlake Chemical 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.| Westlake Chemical vs. The Sherwin Williams | Westlake Chemical vs. Dupont De Nemours | Westlake Chemical vs. Superior Plus Corp | Westlake Chemical vs. NMI Holdings |
| NMI Holdings vs. HYDROFARM HLD GRP | NMI Holdings vs. VIAPLAY GROUP AB | NMI Holdings vs. Titan Machinery | NMI Holdings vs. SCANSOURCE |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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