Correlation Between NMI Holdings and GORE German

Can any of the company-specific risk be diversified away by investing in both NMI Holdings and GORE German 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 NMI Holdings and GORE German into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NMI Holdings and GORE German Office, you can compare the effects of market volatilities on NMI Holdings and GORE German 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 NMI Holdings with a short position of GORE German. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and GORE German.

Diversification Opportunities for NMI Holdings and GORE German

-0.29

Correlation Coefficient

NMI Holdings  GORE German

Very good diversification

The 3 months correlation between NMI and GORE is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and GORE German Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GORE German Office and NMI Holdings 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 NMI Holdings are associated (or correlated) with GORE German. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GORE German Office has no effect on the direction of NMI Holdings i.e., NMI Holdings and GORE German go up and down completely randomly.

Pair Corralation between NMI Holdings and GORE German

Assuming the 90 days horizon NMI Holdings is expected to generate 0.26 times more return on investment than GORE German. However, NMI Holdings is 3.87 times less risky than GORE German. It trades about 0.17 of its potential returns per unit of risk. GORE German Office is currently generating about -0.01 per unit of risk. If you would invest  2,680  in NMI Holdings on February 19, 2024 and sell it today you would earn a total of  420.00  from holding NMI Holdings or generate 15.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

NMI Holdings  vs.  GORE German Office

NMI Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NMI Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, NMI Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

GORE German Office

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GORE German Office has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, GORE German is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NMI Holdings and GORE German

The main advantage of trading using opposite NMI Holdings and GORE German positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, GORE German 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 GORE German will offset losses from the drop in GORE German's long position.

The idea behind NMI Holdings and GORE German Office pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.