Correlation Between M/I Homes and RWE AG
Can any of the company-specific risk be diversified away by investing in both M/I Homes and RWE AG 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 RWE AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MI Homes and RWE AG, you can compare the effects of market volatilities on M/I Homes and RWE AG 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 RWE AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of M/I Homes and RWE AG.
Diversification Opportunities for M/I Homes and RWE AG
Good diversification
The 3 months correlation between M/I and RWE is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and RWE AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RWE AG 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 RWE AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RWE AG has no effect on the direction of M/I Homes i.e., M/I Homes and RWE AG go up and down completely randomly.
Pair Corralation between M/I Homes and RWE AG
Assuming the 90 days horizon MI Homes is expected to generate 1.62 times more return on investment than RWE AG. However, M/I Homes is 1.62 times more volatile than RWE AG. It trades about 0.12 of its potential returns per unit of risk. RWE AG is currently generating about -0.03 per unit of risk. If you would invest 4,260 in MI Homes on September 3, 2024 and sell it today you would earn a total of 11,215 from holding MI Homes or generate 263.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MI Homes vs. RWE AG
Performance |
| Timeline |
| M/I Homes |
| RWE AG |
M/I Homes and RWE AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with M/I Homes and RWE AG
The main advantage of trading using opposite M/I Homes and RWE AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M/I Homes position performs unexpectedly, RWE AG 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 RWE AG will offset losses from the drop in RWE AG's long position.The idea behind MI Homes and RWE AG 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.| RWE AG vs. Warner Music Group | RWE AG vs. CVS Health | RWE AG vs. TITANIUM TRANSPORTGROUP | RWE AG vs. GEAR4MUSIC LS 10 |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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