Correlation Between M/I Homes and Lyxor 1

Can any of the company-specific risk be diversified away by investing in both M/I Homes and Lyxor 1 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 Lyxor 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MI Homes and Lyxor 1 , you can compare the effects of market volatilities on M/I Homes and Lyxor 1 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 Lyxor 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of M/I Homes and Lyxor 1.

Diversification Opportunities for M/I Homes and Lyxor 1

0.49

Correlation Coefficient

M/I Homes  Lyxor 1

Very weak diversification

The 3 months correlation between M/I and Lyxor is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and Lyxor 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor 1 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 Lyxor 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor 1 has no effect on the direction of M/I Homes i.e., M/I Homes and Lyxor 1 go up and down completely randomly.

Pair Corralation between M/I Homes and Lyxor 1

Assuming the 90 days horizon MI Homes is expected to generate 2.76 times more return on investment than Lyxor 1. However, M/I Homes is 2.76 times more volatile than Lyxor 1 . It trades about 0.06 of its potential returns per unit of risk. Lyxor 1 is currently generating about 0.14 per unit of risk. If you would invest  13,880  in MI Homes on September 12, 2024 and sell it today you would earn a total of  1,150  from holding MI Homes or generate 8.29% 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.  Lyxor 1

M/I Homes

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MI Homes are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, M/I Homes may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lyxor 1

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Lyxor 1 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with M/I Homes and Lyxor 1

The main advantage of trading using opposite M/I Homes and Lyxor 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M/I Homes position performs unexpectedly, Lyxor 1 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 Lyxor 1 will offset losses from the drop in Lyxor 1's long position.

The idea behind MI Homes and Lyxor 1 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.