Correlation Between MI Homes and Algoma Steel
Can any of the company-specific risk be diversified away by investing in both MI Homes and Algoma Steel 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 MI Homes and Algoma Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MI Homes and Algoma Steel Group, you can compare the effects of market volatilities on MI Homes and Algoma Steel 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 MI Homes with a short position of Algoma Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of MI Homes and Algoma Steel.
Diversification Opportunities for MI Homes and Algoma Steel
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MHO and Algoma is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and Algoma Steel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algoma Steel Group and MI Homes 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 MI Homes are associated (or correlated) with Algoma Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algoma Steel Group has no effect on the direction of MI Homes i.e., MI Homes and Algoma Steel go up and down completely randomly.
Pair Corralation between MI Homes and Algoma Steel
Considering the 90-day investment horizon MI Homes is expected to generate 0.95 times more return on investment than Algoma Steel. However, MI Homes is 1.05 times less risky than Algoma Steel. It trades about 0.12 of its potential returns per unit of risk. Algoma Steel Group is currently generating about 0.06 per unit of risk. If you would invest 4,712 in MI Homes on September 12, 2024 and sell it today you would earn a total of 11,082 from holding MI Homes or generate 235.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MI Homes vs. Algoma Steel Group
Performance |
| Timeline |
| MI Homes |
| Algoma Steel Group |
MI Homes and Algoma Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MI Homes and Algoma Steel
The main advantage of trading using opposite MI Homes and Algoma Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MI Homes position performs unexpectedly, Algoma Steel 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 Algoma Steel will offset losses from the drop in Algoma Steel's long position.| MI Homes vs. TRI Pointe Homes | MI Homes vs. Beazer Homes USA | MI Homes vs. Century Communities | MI Homes vs. Meritage |
| Algoma Steel vs. Friedman Industries | Algoma Steel vs. ArcelorMittal SA | Algoma Steel vs. Aperam PK | Algoma Steel vs. Acerinox SA ADR |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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