Correlation Between MI Homes and LGI Homes
Can any of the company-specific risk be diversified away by investing in both MI Homes and LGI 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 MI Homes and LGI Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MI Homes and LGI Homes, you can compare the effects of market volatilities on MI Homes and LGI 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 MI Homes with a short position of LGI Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of MI Homes and LGI Homes.
Diversification Opportunities for MI Homes and LGI Homes
Almost no diversification
The 3 months correlation between MHO and LGI is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and LGI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LGI Homes 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 LGI Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LGI Homes has no effect on the direction of MI Homes i.e., MI Homes and LGI Homes go up and down completely randomly.
Pair Corralation between MI Homes and LGI Homes
Considering the 90-day investment horizon MI Homes is expected to generate 1.11 times less return on investment than LGI Homes. In addition to that, MI Homes is 1.01 times more volatile than LGI Homes. It trades about 0.11 of its total potential returns per unit of risk. LGI Homes is currently generating about 0.13 per unit of volatility. If you would invest 10,461 in LGI Homes on August 27, 2024 and sell it today you would earn a total of 661.00 from holding LGI Homes or generate 6.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MI Homes vs. LGI Homes
Performance |
| Timeline |
| MI Homes |
| LGI Homes |
MI Homes and LGI Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MI Homes and LGI Homes
The main advantage of trading using opposite MI Homes and LGI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MI Homes position performs unexpectedly, LGI 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 LGI Homes will offset losses from the drop in LGI Homes' long position.| MI Homes vs. Arhaus Inc | MI Homes vs. Floor Decor Holdings | MI Homes vs. Kingfisher plc | MI Homes vs. Haverty Furniture Companies |
| LGI Homes vs. Arhaus Inc | LGI Homes vs. Floor Decor Holdings | LGI Homes vs. Kingfisher plc | LGI Homes 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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