Correlation Between United Utilities and NMI Holdings
Can any of the company-specific risk be diversified away by investing in both United Utilities 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 United Utilities and NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Utilities Group and NMI Holdings, you can compare the effects of market volatilities on United Utilities 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 United Utilities with a short position of NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and NMI Holdings.
Diversification Opportunities for United Utilities and NMI Holdings
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between United and NMI is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and United Utilities 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 United Utilities Group 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 United Utilities i.e., United Utilities and NMI Holdings go up and down completely randomly.
Pair Corralation between United Utilities and NMI Holdings
Assuming the 90 days trading horizon United Utilities Group is expected to generate 0.63 times more return on investment than NMI Holdings. However, United Utilities Group is 1.58 times less risky than NMI Holdings. It trades about 0.33 of its potential returns per unit of risk. NMI Holdings is currently generating about 0.1 per unit of risk. If you would invest 1,214 in United Utilities Group on September 1, 2024 and sell it today you would earn a total of 136.00 from holding United Utilities Group or generate 11.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. NMI Holdings
Performance |
| Timeline |
| United Utilities |
| NMI Holdings |
United Utilities and NMI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and NMI Holdings
The main advantage of trading using opposite United Utilities and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities 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.| United Utilities vs. Vastned Retail NV | United Utilities vs. RETAIL FOOD GROUP | United Utilities vs. Caseys General Stores | United Utilities vs. BURLINGTON STORES |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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