Correlation Between Meritage and MDC Holdings
Can any of the company-specific risk be diversified away by investing in both Meritage 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 Meritage and MDC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meritage and MDC Holdings, you can compare the effects of market volatilities on Meritage 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 Meritage with a short position of MDC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meritage and MDC Holdings.
Diversification Opportunities for Meritage and MDC Holdings
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Meritage and MDC is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Meritage and MDC Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MDC Holdings and Meritage 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 Meritage 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 Meritage i.e., Meritage and MDC Holdings go up and down completely randomly.
Pair Corralation between Meritage and MDC Holdings
Considering the 90-day investment horizon Meritage is expected to generate 1.58 times less return on investment than MDC Holdings. In addition to that, Meritage is 1.0 times more volatile than MDC Holdings. It trades about 0.06 of its total potential returns per unit of risk. MDC Holdings is currently generating about 0.09 per unit of volatility. If you would invest 4,577 in MDC Holdings on August 28, 2024 and sell it today you would earn a total of 128.00 from holding MDC Holdings or generate 2.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 4.24% |
| Values | Daily Returns |
Meritage vs. MDC Holdings
Performance |
| Timeline |
| Meritage |
| MDC Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Meritage and MDC Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meritage and MDC Holdings
The main advantage of trading using opposite Meritage and MDC Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meritage 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.| Meritage vs. TRI Pointe Homes | Meritage vs. MI Homes | Meritage vs. Beazer Homes USA | Meritage vs. Century Communities |
| 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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