Correlation Between Cincinnati Financial and MI Homes
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and MI 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 Cincinnati Financial and MI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cincinnati Financial and MI Homes, you can compare the effects of market volatilities on Cincinnati Financial and MI 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 Cincinnati Financial with a short position of MI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and MI Homes.
Diversification Opportunities for Cincinnati Financial and MI Homes
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cincinnati and MHO is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MI Homes and Cincinnati Financial 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 Cincinnati Financial are associated (or correlated) with MI Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MI Homes has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and MI Homes go up and down completely randomly.
Pair Corralation between Cincinnati Financial and MI Homes
Given the investment horizon of 90 days Cincinnati Financial is expected to generate 0.5 times more return on investment than MI Homes. However, Cincinnati Financial is 2.01 times less risky than MI Homes. It trades about -0.03 of its potential returns per unit of risk. MI Homes is currently generating about -0.09 per unit of risk. If you would invest 15,117 in Cincinnati Financial on September 12, 2024 and sell it today you would lose (134.00) from holding Cincinnati Financial or give up 0.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cincinnati Financial vs. MI Homes
Performance |
| Timeline |
| Cincinnati Financial |
| MI Homes |
Cincinnati Financial and MI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and MI Homes
The main advantage of trading using opposite Cincinnati Financial and MI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, MI 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 MI Homes will offset losses from the drop in MI Homes' long position.| Cincinnati Financial vs. Aeye Inc | Cincinnati Financial vs. Ep Emerging Markets | Cincinnati Financial vs. LiCycle Holdings Corp | Cincinnati Financial vs. SEI Investments |
| MI Homes vs. TRI Pointe Homes | MI Homes vs. Beazer Homes USA | MI Homes vs. Century Communities | MI Homes vs. Meritage |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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