Correlation Between M/I Homes and Bank of America
Can any of the company-specific risk be diversified away by investing in both M/I Homes and Bank of America 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 Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MI Homes and Bank of America, you can compare the effects of market volatilities on M/I Homes and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of M/I Homes and Bank of America.
Diversification Opportunities for M/I Homes and Bank of America
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between M/I and Bank is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of M/I Homes i.e., M/I Homes and Bank of America go up and down completely randomly.
Pair Corralation between M/I Homes and Bank of America
Assuming the 90 days horizon M/I Homes is expected to generate 1.74 times less return on investment than Bank of America. In addition to that, M/I Homes is 1.25 times more volatile than Bank of America. It trades about 0.09 of its total potential returns per unit of risk. Bank of America is currently generating about 0.19 per unit of volatility. If you would invest 3,620 in Bank of America on September 4, 2024 and sell it today you would earn a total of 880.00 from holding Bank of America or generate 24.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MI Homes vs. Bank of America
Performance |
| Timeline |
| M/I Homes |
| Bank of America |
M/I Homes and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with M/I Homes and Bank of America
The main advantage of trading using opposite M/I Homes and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M/I Homes position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.The idea behind MI Homes and Bank of America 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.| Bank of America vs. Addus HomeCare | Bank of America vs. PARKEN Sport Entertainment | Bank of America vs. MI Homes | Bank of America vs. Beijing Media |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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