Correlation Between Sunny Optical and M/I Homes
Can any of the company-specific risk be diversified away by investing in both Sunny Optical 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 Sunny Optical 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 Sunny Optical Technology and MI Homes, you can compare the effects of market volatilities on Sunny Optical 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 Sunny Optical with a short position of M/I Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunny Optical and M/I Homes.
Diversification Opportunities for Sunny Optical and M/I Homes
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sunny and M/I is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sunny Optical 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 Sunny Optical 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 Sunny Optical 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 Sunny Optical i.e., Sunny Optical and M/I Homes go up and down completely randomly.
Pair Corralation between Sunny Optical and M/I Homes
Assuming the 90 days horizon Sunny Optical Technology is expected to generate 1.66 times more return on investment than M/I Homes. However, Sunny Optical is 1.66 times more volatile than MI Homes. It trades about 0.24 of its potential returns per unit of risk. MI Homes is currently generating about 0.05 per unit of risk. If you would invest 578.00 in Sunny Optical Technology on August 28, 2024 and sell it today you would earn a total of 124.00 from holding Sunny Optical Technology or generate 21.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sunny Optical Technology vs. MI Homes
Performance |
| Timeline |
| Sunny Optical Technology |
| M/I Homes |
Sunny Optical and M/I Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunny Optical and M/I Homes
The main advantage of trading using opposite Sunny Optical and M/I Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunny Optical 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.The idea behind Sunny Optical Technology and MI Homes 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.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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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