Can any of the company-specific risk be diversified away by investing in both NMI Holdings and MOLSON RS 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 MOLSON RS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and MOLSON RS BEVERAGE, you can compare the effects of market volatilities on NMI Holdings and MOLSON RS 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 MOLSON RS. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and MOLSON RS.
Diversification Opportunities for NMI Holdings and MOLSON RS
The 3 months correlation between NMI and MOLSON is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and MOLSON RS BEVERAGE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOLSON RS BEVERAGE 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 MOLSON RS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOLSON RS BEVERAGE has no effect on the direction of NMI Holdings i.e., NMI Holdings and MOLSON RS go up and down completely randomly.
Pair Corralation between NMI Holdings and MOLSON RS
Assuming the 90 days horizon NMI Holdings is expected to generate 0.29 times more return on investment than MOLSON RS. However, NMI Holdings is 3.46 times less risky than MOLSON RS. It trades about 0.07 of its potential returns per unit of risk. MOLSON RS BEVERAGE is currently generating about -0.05 per unit of risk. If you would invest 3,000 in NMI Holdings on March 6, 2024 and sell it today you would earn a total of 60.00 from holding NMI Holdings or generate 2.0% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in NMI Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NMI Holdings reported solid returns over the last few months and may actually be approaching a breakup point.
Over the last 90 days MOLSON RS BEVERAGE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, MOLSON RS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.