Correlation Between Alliance Data and MI Homes
Can any of the company-specific risk be diversified away by investing in both Alliance Data 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 Alliance Data and MI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alliance Data Systems and MI Homes, you can compare the effects of market volatilities on Alliance Data 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 Alliance Data with a short position of MI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Data and MI Homes.
Diversification Opportunities for Alliance Data and MI Homes
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Alliance and 4MI is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MI Homes and Alliance Data 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 Alliance Data Systems 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 Alliance Data i.e., Alliance Data and MI Homes go up and down completely randomly.
Pair Corralation between Alliance Data and MI Homes
Assuming the 90 days trading horizon Alliance Data Systems is expected to generate 1.11 times more return on investment than MI Homes. However, Alliance Data is 1.11 times more volatile than MI Homes. It trades about 0.16 of its potential returns per unit of risk. MI Homes is currently generating about -0.01 per unit of risk. If you would invest 5,830 in Alliance Data Systems on November 2, 2024 and sell it today you would earn a total of 388.00 from holding Alliance Data Systems or generate 6.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alliance Data Systems vs. MI Homes
Performance |
| Timeline |
| Alliance Data Systems |
| MI Homes |
Alliance Data and MI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliance Data and MI Homes
The main advantage of trading using opposite Alliance Data and MI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Data 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.| Alliance Data vs. FIREWEED METALS P | Alliance Data vs. Ringmetall SE | Alliance Data vs. Keck Seng Investments | Alliance Data vs. Apollo Investment Corp |
| MI Homes vs. CullenFrost Bankers | MI Homes vs. Erste Group Bank | MI Homes vs. Chiba Bank | MI Homes vs. Strategic Education |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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