Correlation Between Goldman Sachs and NMI Holdings

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

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

Diversification Opportunities for Goldman Sachs and NMI Holdings

-0.19

Correlation Coefficient

Goldman Sachs  NMI Holdings

Good diversification

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

Pair Corralation between Goldman Sachs and NMI Holdings

Assuming the 90 days trading horizon The Goldman Sachs is expected to generate 1.42 times more return on investment than NMI Holdings. However, Goldman Sachs is 1.42 times more volatile than NMI Holdings. It trades about 0.15 of its potential returns per unit of risk. NMI Holdings is currently generating about 0.02 per unit of risk. If you would invest  46,100  in The Goldman Sachs on September 2, 2024 and sell it today you would earn a total of  11,830  from holding The Goldman Sachs or generate 25.66% return on investment over 90 days.

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

The Goldman Sachs  vs.  NMI Holdings

Goldman Sachs

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Goldman Sachs are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Goldman Sachs unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Goldman Sachs and NMI Holdings

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

The idea behind The Goldman Sachs and NMI Holdings 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.