Don't buy NMIH now, it is a high risk investment
13 Dec, 201813 min read
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NMIH delivered massive losses today. On a longer term basis, investors in NMI HOLDINGS, INC. made -0.02% per day. Thursday's performance of -1.17% was a underperformance compared to it's daily average.
NMIH showed a strong bearish trend over the last 3 months. During this period NMIH delivered -20.34% and saw a maximum drawdown of -23.82%. There were 3 short signals during this period that returned a cumulative of +3.29% to investors.
NMIH has been underperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 6 Apr, 2016 to 26 Sep, 2018. Over the last 2 years 11 months and 9 days, NMIH outperformed the SP500 index on 52% days.
NMIH returned losses on 56% days in the last three months. During this time, it delivered on average -0.32% per day. It delivered it's best daily return of +10.45%, during this period, on Wednesday, 31 Oct, 2018. The longest stort-term trend during this period was 6 losing days, which started on 4 Oct, 2018 and ended on 11 Oct, 2018. This bearish trend lost -15.54% of investor capital.
The last 12 months saw NMIH's investors making profits in 6 months and incurring losses in 6 months. NMIH was less consistent in delivering monthly returs than SP500 index. NMIH significantly outperformed SP500 index in Jul 2018, when it returned +26.67% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. NMIH had a shorter streak of profitable months than SP500 index. It only went up in 3 straight months during the last year.
"My father, being a Scotsman, taught me to look after finances. I'm shrewd. Some people may call me tight.
NMIH is currently seeing overall fall in volatility. In comparison, the SP500 index is seeing increase in volatility. During the last three months, there was a significant surge in NMIH's volatility from 14 Sep, 2018 to 17 Sep, 2018. While there was a significant surge in the SP500 index's volatility from 14 Sep, 2018 to 29 Oct, 2018.
Advanced/professional short-term investors should note that NMIH has significant positive skewness in it's return distribution. This indicates that investors can expect NMIH to recover from drawdowns quickly. Which makes NMIH a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.
SP500 index has more chance of extreme outcomes than NMIH. Therefore, SP500 must receive a lower allocation than NMIH in your portfolio. SP500 index usually has shorter drawdown period than NMIH.
On a general note (since you are interested in NMIH), two instruments that deserve special mention are DFBG and NIHD. They have significantly outperformed the overall market this year.
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