Correlation Between NMI Holdings and General Mills

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

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

Diversification Opportunities for NMI Holdings and General Mills

0.53

Correlation Coefficient

NMI Holdings  General Mills

Very weak diversification

The 3 months correlation between NMI and General is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and General Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Mills 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 General Mills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Mills has no effect on the direction of NMI Holdings i.e., NMI Holdings and General Mills go up and down completely randomly.

Pair Corralation between NMI Holdings and General Mills

Assuming the 90 days horizon NMI Holdings is expected to generate 1.61 times more return on investment than General Mills. However, NMI Holdings is 1.61 times more volatile than General Mills. It trades about 0.02 of its potential returns per unit of risk. General Mills is currently generating about -0.04 per unit of risk. If you would invest  3,700  in NMI Holdings on September 3, 2024 and sell it today you would earn a total of  60.00  from holding NMI Holdings or generate 1.62% return on investment over 90 days.

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

NMI Holdings  vs.  General Mills

NMI Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NMI Holdings are ranked lower than 1 (%) 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.

General Mills

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Mills has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, General Mills is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NMI Holdings and General Mills

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

The idea behind NMI Holdings and General Mills 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.