Correlation Between M/I Homes and Wharf Real

Can any of the company-specific risk be diversified away by investing in both M/I Homes and Wharf Real 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 M/I Homes and Wharf Real into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for M/I Homes and Wharf Real

0.09

Correlation Coefficient

M/I Homes  Wharf Real

Significant diversification

The 3 months correlation between M/I and Wharf is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and Wharf Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wharf Real Estate and M/I 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 Wharf Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wharf Real Estate has no effect on the direction of M/I Homes i.e., M/I Homes and Wharf Real go up and down completely randomly.

Pair Corralation between M/I Homes and Wharf Real

Assuming the 90 days horizon MI Homes is expected to under-perform the Wharf Real. But the stock apears to be less risky and, when comparing its historical volatility, MI Homes is 1.16 times less risky than Wharf Real. The stock trades about -0.13 of its potential returns per unit of risk. The Wharf Real Estate is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  242.00  in Wharf Real Estate on December 28, 2024 and sell it today you would lose (16.00) from holding Wharf Real Estate or give up 6.61% of portfolio value over 90 days.

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

MI Homes  vs.  Wharf Real Estate

M/I Homes

Risk-Adjusted Performance

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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Wharf Real Estate

Risk-Adjusted Performance

Very Weak

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

Pair Trading with M/I Homes and Wharf Real

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

The idea behind MI Homes and Wharf Real Estate 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.