Correlation Between White Mountains and NVR

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

By analyzing existing cross correlation between White Mountains Insurance and NVR Inc, you can compare the effects of market volatilities on White Mountains and NVR 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 White Mountains with a short position of NVR. Check out your portfolio center. Please also check ongoing floating volatility patterns of White Mountains and NVR.

Diversification Opportunities for White Mountains and NVR

-0.41

Correlation Coefficient

White Mountains  NVR

Very good diversification

The 3 months correlation between White and NVR is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding White Mountains Insurance and NVR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVR Inc and White Mountains 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 White Mountains Insurance are associated (or correlated) with NVR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVR Inc has no effect on the direction of White Mountains i.e., White Mountains and NVR go up and down completely randomly.

Pair Corralation between White Mountains and NVR

Considering the 90-day investment horizon White Mountains Insurance is expected to generate 1.18 times more return on investment than NVR. However, White Mountains is 1.18 times more volatile than NVR Inc. It trades about 0.33 of its potential returns per unit of risk. NVR Inc is currently generating about 0.04 per unit of risk. If you would invest  180,530  in White Mountains Insurance on September 2, 2024 and sell it today you would earn a total of  20,469  from holding White Mountains Insurance or generate 11.34% return on investment over 90 days.

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

White Mountains Insurance  vs.  NVR Inc

White Mountains Insurance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in White Mountains Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, White Mountains may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NVR Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NVR Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, NVR is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with White Mountains and NVR

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

The idea behind White Mountains Insurance and NVR Inc 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.