Correlation Between MI Homes and Kingfisher Plc
Can any of the company-specific risk be diversified away by investing in both MI Homes and Kingfisher Plc 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 Kingfisher Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MI Homes and Kingfisher plc, you can compare the effects of market volatilities on MI Homes and Kingfisher Plc 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 Kingfisher Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of MI Homes and Kingfisher Plc.
Diversification Opportunities for MI Homes and Kingfisher Plc
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MHO and Kingfisher is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and Kingfisher plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingfisher plc 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 Kingfisher Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingfisher plc has no effect on the direction of MI Homes i.e., MI Homes and Kingfisher Plc go up and down completely randomly.
Pair Corralation between MI Homes and Kingfisher Plc
Considering the 90-day investment horizon MI Homes is expected to generate 0.6 times more return on investment than Kingfisher Plc. However, MI Homes is 1.66 times less risky than Kingfisher Plc. It trades about 0.1 of its potential returns per unit of risk. Kingfisher plc is currently generating about 0.03 per unit of risk. If you would invest 7,533 in MI Homes on August 31, 2024 and sell it today you would earn a total of 8,970 from holding MI Homes or generate 119.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 69.79% |
| Values | Daily Returns |
MI Homes vs. Kingfisher plc
Performance |
| Timeline |
| MI Homes |
| Kingfisher plc |
MI Homes and Kingfisher Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MI Homes and Kingfisher Plc
The main advantage of trading using opposite MI Homes and Kingfisher Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MI Homes position performs unexpectedly, Kingfisher Plc 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 Kingfisher Plc will offset losses from the drop in Kingfisher Plc's long position.| MI Homes vs. Century Communities | MI Homes vs. Dream Finders Homes | MI Homes vs. DR Horton | MI Homes vs. Everus Construction Group |
| Kingfisher Plc vs. Lowes Companies | Kingfisher Plc vs. Home Depot | Kingfisher Plc vs. Live Ventures | Kingfisher Plc vs. Haverty Furniture Companies |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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