Correlation Between MI Homes and MDC Holdings
Can any of the company-specific risk be diversified away by investing in both MI Homes and MDC Holdings 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 MDC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MI Homes and MDC Holdings, you can compare the effects of market volatilities on MI Homes and MDC Holdings 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 MDC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of MI Homes and MDC Holdings.
Diversification Opportunities for MI Homes and MDC Holdings
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MHO and MDC is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and MDC Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MDC Holdings 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 MDC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MDC Holdings has no effect on the direction of MI Homes i.e., MI Homes and MDC Holdings go up and down completely randomly.
Pair Corralation between MI Homes and MDC Holdings
Considering the 90-day investment horizon MI Homes is expected to generate 1.25 times more return on investment than MDC Holdings. However, MI Homes is 1.25 times more volatile than MDC Holdings. It trades about 0.13 of its potential returns per unit of risk. MDC Holdings is currently generating about 0.15 per unit of risk. If you would invest 4,445 in MI Homes on August 28, 2024 and sell it today you would earn a total of 12,469 from holding MI Homes or generate 280.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 31.72% |
| Values | Daily Returns |
MI Homes vs. MDC Holdings
Performance |
| Timeline |
| MI Homes |
| MDC Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
MI Homes and MDC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MI Homes and MDC Holdings
The main advantage of trading using opposite MI Homes and MDC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MI Homes position performs unexpectedly, MDC Holdings 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 MDC Holdings will offset losses from the drop in MDC Holdings' long position.| MI Homes vs. Arhaus Inc | MI Homes vs. Floor Decor Holdings | MI Homes vs. Kingfisher plc | MI Homes vs. Haverty Furniture Companies |
| MDC Holdings vs. Taylor Morn Home | MDC Holdings vs. Century Communities | MDC Holdings vs. Beazer Homes USA | MDC Holdings vs. Meritage |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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