Correlation Between NMI Holdings and HubSpot

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

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

Diversification Opportunities for NMI Holdings and HubSpot

-0.26

Correlation Coefficient

NMI Holdings  HubSpot

Very good diversification

The 3 months correlation between NMI and HubSpot is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and HubSpot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HubSpot 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 HubSpot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HubSpot has no effect on the direction of NMI Holdings i.e., NMI Holdings and HubSpot go up and down completely randomly.

Pair Corralation between NMI Holdings and HubSpot

Assuming the 90 days horizon NMI Holdings is expected to generate 5.15 times less return on investment than HubSpot. But when comparing it to its historical volatility, NMI Holdings is 1.31 times less risky than HubSpot. It trades about 0.1 of its potential returns per unit of risk. HubSpot is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  51,180  in HubSpot on September 1, 2024 and sell it today you would earn a total of  16,900  from holding HubSpot or generate 33.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

NMI Holdings  vs.  HubSpot

NMI Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NMI Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NMI Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

HubSpot

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HubSpot are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, HubSpot reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMI Holdings and HubSpot

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

The idea behind NMI Holdings and HubSpot 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.