Correlation Between Old Republic and NI Holdings

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

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

Diversification Opportunities for Old Republic and NI Holdings

0.46

Correlation Coefficient

Old Republic  NI Holdings

Very weak diversification

The 3 months correlation between Old and NODK is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Old Republic International and NI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NI Holdings and Old Republic 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 Old Republic International are associated (or correlated) with NI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NI Holdings has no effect on the direction of Old Republic i.e., Old Republic and NI Holdings go up and down completely randomly.

Pair Corralation between Old Republic and NI Holdings

Considering the 90-day investment horizon Old Republic International is expected to generate 0.91 times more return on investment than NI Holdings. However, Old Republic International is 1.1 times less risky than NI Holdings. It trades about 0.04 of its potential returns per unit of risk. NI Holdings is currently generating about 0.02 per unit of risk. If you would invest  3,494  in Old Republic International on September 24, 2024 and sell it today you would earn a total of  103.00  from holding Old Republic International or generate 2.95% return on investment over 90 days.

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

Old Republic International  vs.  NI Holdings

Old Republic Interna

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Old Republic International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Old Republic is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

NI Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NI Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, NI Holdings is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Old Republic and NI Holdings

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

The idea behind Old Republic International and NI 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.