Correlation Between Installed Building and MI Homes
Can any of the company-specific risk be diversified away by investing in both Installed Building 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 Installed Building and MI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Installed Building Products and MI Homes, you can compare the effects of market volatilities on Installed Building 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 Installed Building with a short position of MI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Installed Building and MI Homes.
Diversification Opportunities for Installed Building and MI Homes
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Installed and MHO is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Installed Building Products and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MI Homes and Installed Building 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 Installed Building Products 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 Installed Building i.e., Installed Building and MI Homes go up and down completely randomly.
Pair Corralation between Installed Building and MI Homes
Considering the 90-day investment horizon Installed Building is expected to generate 2.97 times less return on investment than MI Homes. In addition to that, Installed Building is 1.2 times more volatile than MI Homes. It trades about 0.03 of its total potential returns per unit of risk. MI Homes is currently generating about 0.09 per unit of volatility. If you would invest 12,449 in MI Homes on August 26, 2024 and sell it today you would earn a total of 3,610 from holding MI Homes or generate 29.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Installed Building Products vs. MI Homes
Performance |
| Timeline |
| Installed Building |
| MI Homes |
Installed Building and MI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Installed Building and MI Homes
The main advantage of trading using opposite Installed Building and MI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Installed Building 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.| Installed Building vs. Century Communities | Installed Building vs. MI Homes | Installed Building vs. Taylor Morn Home | Installed Building vs. TRI Pointe Homes |
| MI Homes vs. Arhaus Inc | MI Homes vs. Floor Decor Holdings | MI Homes vs. Haverty Furniture Companies | MI Homes vs. Kingfisher plc |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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