Correlation Between Benchmark Electronics and M/I Homes
Can any of the company-specific risk be diversified away by investing in both Benchmark 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 Benchmark 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 Benchmark Electronics and MI Homes, you can compare the effects of market volatilities on Benchmark 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 Benchmark Electronics with a short position of M/I Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Benchmark Electronics and M/I Homes.
Diversification Opportunities for Benchmark Electronics and M/I Homes
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Benchmark and M/I is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Benchmark Electronics and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M/I Homes and Benchmark 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 Benchmark Electronics 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 Benchmark Electronics i.e., Benchmark Electronics and M/I Homes go up and down completely randomly.
Pair Corralation between Benchmark Electronics and M/I Homes
Assuming the 90 days horizon Benchmark Electronics is expected to generate 1.71 times less return on investment than M/I Homes. In addition to that, Benchmark Electronics is 1.03 times more volatile than MI Homes. It trades about 0.07 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 |
Benchmark Electronics vs. MI Homes
Performance |
| Timeline |
| Benchmark Electronics |
| M/I Homes |
Benchmark Electronics and M/I Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Benchmark Electronics and M/I Homes
The main advantage of trading using opposite Benchmark Electronics and M/I Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Benchmark 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.| Benchmark Electronics vs. Superior Plus Corp | Benchmark Electronics vs. SIVERS SEMICONDUCTORS AB | Benchmark Electronics vs. Norsk Hydro ASA | Benchmark Electronics vs. Reliance Steel Aluminum |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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