Correlation Between MI Homes and PepsiCo
Can any of the company-specific risk be diversified away by investing in both MI Homes and PepsiCo 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 PepsiCo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MI Homes and PepsiCo, you can compare the effects of market volatilities on MI Homes and PepsiCo 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 PepsiCo. Check out your portfolio center. Please also check ongoing floating volatility patterns of MI Homes and PepsiCo.
Diversification Opportunities for MI Homes and PepsiCo
Modest diversification
The 3 months correlation between MHO and PepsiCo is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo 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 PepsiCo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PepsiCo has no effect on the direction of MI Homes i.e., MI Homes and PepsiCo go up and down completely randomly.
Pair Corralation between MI Homes and PepsiCo
Considering the 90-day investment horizon MI Homes is expected to generate 2.38 times more return on investment than PepsiCo. However, MI Homes is 2.38 times more volatile than PepsiCo. It trades about 0.1 of its potential returns per unit of risk. PepsiCo is currently generating about -0.01 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MI Homes vs. PepsiCo
Performance |
| Timeline |
| MI Homes |
| PepsiCo |
MI Homes and PepsiCo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MI Homes and PepsiCo
The main advantage of trading using opposite MI Homes and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MI Homes position performs unexpectedly, PepsiCo 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 PepsiCo will offset losses from the drop in PepsiCo'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 |
| PepsiCo vs. Monster Beverage Corp | PepsiCo vs. RLJ Lodging Trust | PepsiCo vs. Aquagold International | PepsiCo vs. Stepstone 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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