Correlation Between MI Homes and Steven Madden
Can any of the company-specific risk be diversified away by investing in both MI Homes and Steven Madden 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 Steven Madden into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MI Homes and Steven Madden, you can compare the effects of market volatilities on MI Homes and Steven Madden 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 Steven Madden. Check out your portfolio center. Please also check ongoing floating volatility patterns of MI Homes and Steven Madden.
Diversification Opportunities for MI Homes and Steven Madden
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MHO and Steven is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and Steven Madden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steven Madden 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 Steven Madden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steven Madden has no effect on the direction of MI Homes i.e., MI Homes and Steven Madden go up and down completely randomly.
Pair Corralation between MI Homes and Steven Madden
Considering the 90-day investment horizon MI Homes is expected to generate 1.21 times more return on investment than Steven Madden. However, MI Homes is 1.21 times more volatile than Steven Madden. It trades about 0.14 of its potential returns per unit of risk. Steven Madden is currently generating about -0.01 per unit of risk. If you would invest 15,345 in MI Homes on August 30, 2024 and sell it today you would earn a total of 1,109 from holding MI Homes or generate 7.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MI Homes vs. Steven Madden
Performance |
| Timeline |
| MI Homes |
| Steven Madden |
MI Homes and Steven Madden Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MI Homes and Steven Madden
The main advantage of trading using opposite MI Homes and Steven Madden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MI Homes position performs unexpectedly, Steven Madden 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 Steven Madden will offset losses from the drop in Steven Madden's long position.The idea behind MI Homes and Steven Madden pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Steven Madden vs. Weyco Group | Steven Madden vs. Caleres | Steven Madden vs. Rocky Brands | Steven Madden vs. Designer Brands |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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