Correlation Between Walmart and NMI Holdings
Can any of the company-specific risk be diversified away by investing in both Walmart 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 Walmart and NMI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and NMI Holdings, you can compare the effects of market volatilities on Walmart 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 Walmart with a short position of NMI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and NMI Holdings.
Diversification Opportunities for Walmart and NMI Holdings
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Walmart and NMI is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and Walmart 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 Walmart 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 Walmart i.e., Walmart and NMI Holdings go up and down completely randomly.
Pair Corralation between Walmart and NMI Holdings
Assuming the 90 days trading horizon Walmart is expected to generate 0.9 times more return on investment than NMI Holdings. However, Walmart is 1.11 times less risky than NMI Holdings. It trades about 0.46 of its potential returns per unit of risk. NMI Holdings is currently generating about 0.22 per unit of risk. If you would invest 7,935 in Walmart on September 12, 2024 and sell it today you would earn a total of 1,106 from holding Walmart or generate 13.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Walmart vs. NMI Holdings
Performance |
| Timeline |
| Walmart |
| NMI Holdings |
Walmart and NMI Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and NMI Holdings
The main advantage of trading using opposite Walmart and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart 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.| Walmart vs. IMPERIAL TOBACCO | Walmart vs. SCANDMEDICAL SOLDK 040 | Walmart vs. Scandinavian Tobacco Group | Walmart vs. Clearside Biomedical |
| NMI Holdings vs. Nufarm Limited | NMI Holdings vs. AVITA Medical | NMI Holdings vs. Sterling Construction | NMI Holdings vs. Avanos Medical |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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