Correlation Between NMI Holdings and Albemarle
Can any of the company-specific risk be diversified away by investing in both NMI Holdings and Albemarle 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 Albemarle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NMI Holdings and Albemarle, you can compare the effects of market volatilities on NMI Holdings and Albemarle 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 Albemarle. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and Albemarle.
Diversification Opportunities for NMI Holdings and Albemarle
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between NMI and Albemarle is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Albemarle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle 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 Albemarle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albemarle has no effect on the direction of NMI Holdings i.e., NMI Holdings and Albemarle go up and down completely randomly.
Pair Corralation between NMI Holdings and Albemarle
Assuming the 90 days horizon NMI Holdings is expected to generate 18.74 times less return on investment than Albemarle. But when comparing it to its historical volatility, NMI Holdings is 2.35 times less risky than Albemarle. It trades about 0.02 of its potential returns per unit of risk. Albemarle is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 7,518 in Albemarle on September 5, 2024 and sell it today you would earn a total of 2,952 from holding Albemarle or generate 39.27% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 98.46% |
Values | Daily Returns |
NMI Holdings vs. Albemarle
Performance |
Timeline |
NMI Holdings |
Albemarle |
NMI Holdings and Albemarle Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with NMI Holdings and Albemarle
The main advantage of trading using opposite NMI Holdings and Albemarle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, Albemarle 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 Albemarle will offset losses from the drop in Albemarle's long position.NMI Holdings vs. HYATT HOTELS A | NMI Holdings vs. Pebblebrook Hotel Trust | NMI Holdings vs. Penta Ocean Construction Co | NMI Holdings vs. Dalata Hotel Group |
Albemarle vs. The Sherwin Williams | Albemarle vs. Dupont De Nemours | Albemarle vs. Superior Plus Corp | Albemarle vs. NMI Holdings |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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