Correlation Between NMI Holdings and Fortinet

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

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

Diversification Opportunities for NMI Holdings and Fortinet

-0.19

Correlation Coefficient

NMI Holdings  Fortinet

Good diversification

The 3 months correlation between NMI and Fortinet is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Fortinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortinet 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 Fortinet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortinet has no effect on the direction of NMI Holdings i.e., NMI Holdings and Fortinet go up and down completely randomly.

Pair Corralation between NMI Holdings and Fortinet

Assuming the 90 days horizon NMI Holdings is expected to generate 3.95 times less return on investment than Fortinet. But when comparing it to its historical volatility, NMI Holdings is 1.27 times less risky than Fortinet. It trades about 0.1 of its potential returns per unit of risk. Fortinet is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  7,235  in Fortinet on September 1, 2024 and sell it today you would earn a total of  1,756  from holding Fortinet or generate 24.27% 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.  Fortinet

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.

Fortinet

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fortinet are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fortinet reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NMI Holdings and Fortinet

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

The idea behind NMI Holdings and Fortinet 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.