Correlation Between M/I Homes and Autohome
Can any of the company-specific risk be diversified away by investing in both M/I Homes and Autohome 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 M/I Homes and Autohome into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MI Homes and Autohome ADR, you can compare the effects of market volatilities on M/I Homes and Autohome 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 M/I Homes with a short position of Autohome. Check out your portfolio center. Please also check ongoing floating volatility patterns of M/I Homes and Autohome.
Diversification Opportunities for M/I Homes and Autohome
Very weak diversification
The 3 months correlation between M/I and Autohome is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and Autohome ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autohome ADR and M/I Homes 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 MI Homes are associated (or correlated) with Autohome. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autohome ADR has no effect on the direction of M/I Homes i.e., M/I Homes and Autohome go up and down completely randomly.
Pair Corralation between M/I Homes and Autohome
Assuming the 90 days horizon MI Homes is expected to generate 0.85 times more return on investment than Autohome. However, MI Homes is 1.18 times less risky than Autohome. It trades about 0.02 of its potential returns per unit of risk. Autohome ADR is currently generating about -0.05 per unit of risk. If you would invest 14,660 in MI Homes on August 28, 2024 and sell it today you would earn a total of 180.00 from holding MI Homes or generate 1.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MI Homes vs. Autohome ADR
Performance |
| Timeline |
| M/I Homes |
| Autohome ADR |
M/I Homes and Autohome Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with M/I Homes and Autohome
The main advantage of trading using opposite M/I Homes and Autohome positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M/I Homes position performs unexpectedly, Autohome 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 Autohome will offset losses from the drop in Autohome's long position.The idea behind MI Homes and Autohome ADR 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.| Autohome vs. DeVry Education Group | Autohome vs. Vulcan Materials | Autohome vs. CHINA EDUCATION GROUP | Autohome vs. STRAYER EDUCATION |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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