Correlation Between TT Electronics and M/I Homes
Can any of the company-specific risk be diversified away by investing in both TT Electronics and M/I Homes 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 TT Electronics and M/I Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TT Electronics PLC and MI Homes, you can compare the effects of market volatilities on TT Electronics and M/I Homes 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 TT Electronics with a short position of M/I Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of TT Electronics and M/I Homes.
Diversification Opportunities for TT Electronics and M/I Homes
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between 7TT and M/I is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding TT Electronics PLC and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M/I Homes and TT Electronics 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 TT Electronics PLC are associated (or correlated) with M/I Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M/I Homes has no effect on the direction of TT Electronics i.e., TT Electronics and M/I Homes go up and down completely randomly.
Pair Corralation between TT Electronics and M/I Homes
Assuming the 90 days trading horizon TT Electronics PLC is expected to under-perform the M/I Homes. In addition to that, TT Electronics is 1.26 times more volatile than MI Homes. It trades about -0.01 of its total potential returns per unit of risk. MI Homes is currently generating about 0.12 per unit of volatility. If you would invest 4,380 in MI Homes on September 18, 2024 and sell it today you would earn a total of 10,535 from holding MI Homes or generate 240.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TT Electronics PLC vs. MI Homes
Performance |
| Timeline |
| TT Electronics PLC |
| M/I Homes |
TT Electronics and M/I Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TT Electronics and M/I Homes
The main advantage of trading using opposite TT Electronics and M/I Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TT Electronics position performs unexpectedly, M/I Homes 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 M/I Homes will offset losses from the drop in M/I Homes' long position.| TT Electronics vs. Apple Inc | TT Electronics vs. Apple Inc | TT Electronics vs. Apple Inc | TT Electronics vs. Apple Inc |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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