Correlation Between Gladstone Investment and M/I Homes

Can any of the company-specific risk be diversified away by investing in both Gladstone Investment 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 Gladstone Investment 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 Gladstone Investment and MI Homes, you can compare the effects of market volatilities on Gladstone Investment 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 Gladstone Investment with a short position of M/I Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gladstone Investment and M/I Homes.

Diversification Opportunities for Gladstone Investment and M/I Homes

0.47

Correlation Coefficient

Gladstone Investment  M/I Homes

Very weak diversification

The 3 months correlation between Gladstone and M/I is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Gladstone Investment and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M/I Homes and Gladstone Investment 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 Gladstone Investment 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 Gladstone Investment i.e., Gladstone Investment and M/I Homes go up and down completely randomly.

Pair Corralation between Gladstone Investment and M/I Homes

Assuming the 90 days horizon Gladstone Investment is expected to generate 0.92 times more return on investment than M/I Homes. However, Gladstone Investment is 1.09 times less risky than M/I Homes. It trades about 0.14 of its potential returns per unit of risk. MI Homes is currently generating about 0.06 per unit of risk. If you would invest  1,085  in Gladstone Investment on September 2, 2024 and sell it today you would earn a total of  216.00  from holding Gladstone Investment or generate 19.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Gladstone Investment  vs.  MI Homes

Gladstone Investment

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gladstone Investment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gladstone Investment reported solid returns over the last few months and may actually be approaching a breakup point.

M/I Homes

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MI Homes are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, M/I Homes may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gladstone Investment and M/I Homes

The main advantage of trading using opposite Gladstone Investment and M/I Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gladstone Investment 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 Gladstone Investment 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..