Correlation Between Townsquare Media and M/I Homes

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

Diversification Opportunities for Townsquare Media and M/I Homes

0.67

Correlation Coefficient

Townsquare Media  M/I Homes

Poor diversification

The 3 months correlation between Townsquare and M/I is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Townsquare Media and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M/I Homes and Townsquare Media 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 Townsquare Media 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 Townsquare Media i.e., Townsquare Media and M/I Homes go up and down completely randomly.

Pair Corralation between Townsquare Media and M/I Homes

Assuming the 90 days horizon Townsquare Media is expected to generate 1.67 times less return on investment than M/I Homes. In addition to that, Townsquare Media is 1.14 times more volatile than MI Homes. It trades about 0.05 of its total potential returns per unit of risk. MI Homes is currently generating about 0.09 per unit of volatility. If you would invest  5,500  in MI Homes on October 24, 2024 and sell it today you would earn a total of  7,715  from holding MI Homes or generate 140.27% return on investment over 90 days.

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

Townsquare Media  vs.  MI Homes

Townsquare Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Townsquare Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Townsquare Media is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

M/I Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MI Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Townsquare Media and M/I Homes

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