Correlation Between M/I Homes and INSURANCE AUST

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

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

Diversification Opportunities for M/I Homes and INSURANCE AUST

0.22

Correlation Coefficient

M/I Homes  INSURANCE AUST

Modest diversification

The 3 months correlation between M/I and INSURANCE is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and INSURANCE AUST GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INSURANCE AUST GRP 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 INSURANCE AUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INSURANCE AUST GRP has no effect on the direction of M/I Homes i.e., M/I Homes and INSURANCE AUST go up and down completely randomly.

Pair Corralation between M/I Homes and INSURANCE AUST

Assuming the 90 days horizon MI Homes is expected to under-perform the INSURANCE AUST. But the stock apears to be less risky and, when comparing its historical volatility, MI Homes is 1.1 times less risky than INSURANCE AUST. The stock trades about -0.27 of its potential returns per unit of risk. The INSURANCE AUST GRP is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  507.00  in INSURANCE AUST GRP on December 3, 2024 and sell it today you would lose (41.00) from holding INSURANCE AUST GRP or give up 8.09% of portfolio value over 90 days.

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

MI Homes  vs.  INSURANCE AUST GRP

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.

INSURANCE AUST GRP

Risk-Adjusted Performance

Very Weak

Over the last 90 days INSURANCE AUST GRP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with M/I Homes and INSURANCE AUST

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

The idea behind MI Homes and INSURANCE AUST GRP 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.

Check out your portfolio center.

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..