Correlation Between SMA Solar and M/I Homes
Can any of the company-specific risk be diversified away by investing in both SMA Solar and M/I 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 SMA Solar and M/I Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SMA Solar Technology and MI Homes, you can compare the effects of market volatilities on SMA Solar and M/I 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 SMA Solar with a short position of M/I Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMA Solar and M/I Homes.
Diversification Opportunities for SMA Solar and M/I Homes
Very good diversification
The 3 months correlation between SMA and M/I is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding SMA Solar Technology and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M/I Homes and SMA Solar 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 SMA Solar Technology are associated (or correlated) with M/I Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M/I Homes has no effect on the direction of SMA Solar i.e., SMA Solar and M/I Homes go up and down completely randomly.
Pair Corralation between SMA Solar and M/I Homes
Assuming the 90 days horizon SMA Solar Technology is expected to under-perform the M/I Homes. In addition to that, SMA Solar is 1.97 times more volatile than MI Homes. It trades about -0.19 of its total potential returns per unit of risk. MI Homes is currently generating about 0.05 per unit of volatility. If you would invest 14,580 in MI Homes on August 28, 2024 and sell it today you would earn a total of 260.00 from holding MI Homes or generate 1.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
SMA Solar Technology vs. MI Homes
Performance |
| Timeline |
| SMA Solar Technology |
| M/I Homes |
SMA Solar and M/I Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMA Solar and M/I Homes
The main advantage of trading using opposite SMA Solar and M/I Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMA Solar position performs unexpectedly, M/I 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 M/I Homes will offset losses from the drop in M/I Homes' long position.| SMA Solar vs. Superior Plus Corp | SMA Solar vs. Origin Agritech | SMA Solar vs. Identiv | SMA Solar vs. INTUITIVE SURGICAL |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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