Correlation Between MI Homes and Hollywood Bowl

Can any of the company-specific risk be diversified away by investing in both MI Homes and Hollywood Bowl 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 MI Homes and Hollywood Bowl into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MI Homes and Hollywood Bowl Group, you can compare the effects of market volatilities on MI Homes and Hollywood Bowl 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 MI Homes with a short position of Hollywood Bowl. Check out your portfolio center. Please also check ongoing floating volatility patterns of MI Homes and Hollywood Bowl.

Diversification Opportunities for MI Homes and Hollywood Bowl

0.43

Correlation Coefficient

MI Homes  Hollywood Bowl

Very weak diversification

The 3 months correlation between 4MI and Hollywood is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and Hollywood Bowl Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hollywood Bowl Group and MI Homes 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 MI Homes are associated (or correlated) with Hollywood Bowl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hollywood Bowl Group has no effect on the direction of MI Homes i.e., MI Homes and Hollywood Bowl go up and down completely randomly.

Pair Corralation between MI Homes and Hollywood Bowl

Assuming the 90 days horizon MI Homes is expected to generate 1.19 times more return on investment than Hollywood Bowl. However, MI Homes is 1.19 times more volatile than Hollywood Bowl Group. It trades about 0.1 of its potential returns per unit of risk. Hollywood Bowl Group is currently generating about 0.04 per unit of risk. If you would invest  4,880  in MI Homes on October 4, 2024 and sell it today you would earn a total of  7,925  from holding MI Homes or generate 162.4% return on investment over 90 days.

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

MI Homes  vs.  Hollywood Bowl Group

MI 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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hollywood Bowl Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hollywood Bowl Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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 MI Homes and Hollywood Bowl

The main advantage of trading using opposite MI Homes and Hollywood Bowl positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MI Homes position performs unexpectedly, Hollywood Bowl 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 Hollywood Bowl will offset losses from the drop in Hollywood Bowl's long position.

The idea behind MI Homes and Hollywood Bowl Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.