Correlation Between Bank of China and NMI Holdings
Can any of the company-specific risk be diversified away by investing in both Bank of China 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 Bank of China and NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of China and NMI Holdings, you can compare the effects of market volatilities on Bank of China 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 Bank of China with a short position of NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of China and NMI Holdings.
Diversification Opportunities for Bank of China and NMI Holdings
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and NMI is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Bank of China and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and Bank of China 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 Bank of China 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 Bank of China i.e., Bank of China and NMI Holdings go up and down completely randomly.
Pair Corralation between Bank of China and NMI Holdings
Assuming the 90 days horizon Bank of China is expected to generate 6.15 times more return on investment than NMI Holdings. However, Bank of China is 6.15 times more volatile than NMI Holdings. It trades about 0.09 of its potential returns per unit of risk. NMI Holdings is currently generating about 0.1 per unit of risk. If you would invest 18.00 in Bank of China on September 3, 2024 and sell it today you would earn a total of 25.00 from holding Bank of China or generate 138.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of China vs. NMI Holdings
Performance |
| Timeline |
| Bank of China |
| NMI Holdings |
Bank of China and NMI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of China and NMI Holdings
The main advantage of trading using opposite Bank of China and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of China 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.| Bank of China vs. Perdoceo Education | Bank of China vs. Strategic Education | Bank of China vs. ONWARD MEDICAL BV | Bank of China vs. CompuGroup Medical SE |
| NMI Holdings vs. Harmony Gold Mining | NMI Holdings vs. WT OFFSHORE | NMI Holdings vs. Luckin Coffee | NMI Holdings vs. BJs Restaurants |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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