Correlation Between MI Homes and Lennar
Can any of the company-specific risk be diversified away by investing in both MI Homes and Lennar 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 Lennar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MI Homes and Lennar, you can compare the effects of market volatilities on MI Homes and Lennar 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 Lennar. Check out your portfolio center. Please also check ongoing floating volatility patterns of MI Homes and Lennar.
Diversification Opportunities for MI Homes and Lennar
Very poor diversification
The 3 months correlation between MHO and Lennar is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar 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 Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of MI Homes i.e., MI Homes and Lennar go up and down completely randomly.
Pair Corralation between MI Homes and Lennar
Considering the 90-day investment horizon MI Homes is expected to generate 1.02 times more return on investment than Lennar. However, MI Homes is 1.02 times more volatile than Lennar. It trades about 0.15 of its potential returns per unit of risk. Lennar is currently generating about 0.05 per unit of risk. If you would invest 15,300 in MI Homes on August 31, 2024 and sell it today you would earn a total of 1,154 from holding MI Homes or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MI Homes vs. Lennar
Performance |
| Timeline |
| MI Homes |
| Lennar |
MI Homes and Lennar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MI Homes and Lennar
The main advantage of trading using opposite MI Homes and Lennar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MI Homes position performs unexpectedly, Lennar 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 Lennar will offset losses from the drop in Lennar'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 |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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