Correlation Between M/I Homes and ZTE
Can any of the company-specific risk be diversified away by investing in both M/I Homes and ZTE 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 ZTE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MI Homes and ZTE Corporation, you can compare the effects of market volatilities on M/I Homes and ZTE 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 ZTE. Check out your portfolio center. Please also check ongoing floating volatility patterns of M/I Homes and ZTE.
Diversification Opportunities for M/I Homes and ZTE
Modest diversification
The 3 months correlation between M/I and ZTE is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and ZTE Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZTE Corporation 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 ZTE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZTE Corporation has no effect on the direction of M/I Homes i.e., M/I Homes and ZTE go up and down completely randomly.
Pair Corralation between M/I Homes and ZTE
Assuming the 90 days horizon MI Homes is expected to generate 0.59 times more return on investment than ZTE. However, MI Homes is 1.7 times less risky than ZTE. It trades about 0.1 of its potential returns per unit of risk. ZTE Corporation is currently generating about 0.03 per unit of risk. If you would invest 7,000 in MI Homes on September 4, 2024 and sell it today you would earn a total of 8,600 from holding MI Homes or generate 122.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.74% |
| Values | Daily Returns |
MI Homes vs. ZTE Corp.
Performance |
| Timeline |
| M/I Homes |
| ZTE Corporation |
M/I Homes and ZTE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with M/I Homes and ZTE
The main advantage of trading using opposite M/I Homes and ZTE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M/I Homes position performs unexpectedly, ZTE 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 ZTE will offset losses from the drop in ZTE's long position.The idea behind MI Homes and ZTE Corporation 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.| ZTE vs. Information Services International Dentsu | ZTE vs. Public Storage | ZTE vs. Datang International Power | ZTE vs. TERADATA |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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