Correlation Between Axos Financial and NMI Holdings

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

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

Diversification Opportunities for Axos Financial and NMI Holdings

-0.52

Correlation Coefficient

Axos Financial  NMI Holdings

Excellent diversification

The 3 months correlation between Axos and NMI is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Axos Financial and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings and Axos Financial 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 Axos Financial 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 Axos Financial i.e., Axos Financial and NMI Holdings go up and down completely randomly.

Pair Corralation between Axos Financial and NMI Holdings

Allowing for the 90-day total investment horizon Axos Financial is expected to under-perform the NMI Holdings. In addition to that, Axos Financial is 1.1 times more volatile than NMI Holdings. It trades about -0.09 of its total potential returns per unit of risk. NMI Holdings is currently generating about 0.01 per unit of volatility. If you would invest  3,761  in NMI Holdings on September 18, 2024 and sell it today you would earn a total of  8.00  from holding NMI Holdings or generate 0.21% return on investment over 90 days.

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

Axos Financial  vs.  NMI Holdings

Axos Financial

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Axos Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Axos Financial showed solid returns over the last few months and may actually be approaching a breakup point.

NMI Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NMI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Axos Financial and NMI Holdings

The main advantage of trading using opposite Axos Financial and NMI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axos Financial 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 Axos Financial 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.