Correlation Between MI Homes and Evotec SE

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

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

Diversification Opportunities for MI Homes and Evotec SE

-0.11

Correlation Coefficient

MI Homes  Evotec SE

Good diversification

The 3 months correlation between 4MI and Evotec is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and Evotec SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evotec SE 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 Evotec SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evotec SE has no effect on the direction of MI Homes i.e., MI Homes and Evotec SE go up and down completely randomly.

Pair Corralation between MI Homes and Evotec SE

Assuming the 90 days horizon MI Homes is expected to under-perform the Evotec SE. But the stock apears to be less risky and, when comparing its historical volatility, MI Homes is 1.39 times less risky than Evotec SE. The stock trades about -0.49 of its potential returns per unit of risk. The Evotec SE is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  893.00  in Evotec SE on October 6, 2024 and sell it today you would lose (39.00) from holding Evotec SE or give up 4.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

MI Homes  vs.  Evotec SE

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.

Evotec SE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Evotec SE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Evotec SE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MI Homes and Evotec SE

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

The idea behind MI Homes and Evotec SE 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.