Correlation Between LANDSEA HOMES and M/I Homes

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

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

Diversification Opportunities for LANDSEA HOMES and M/I Homes

0.94

Correlation Coefficient

LANDSEA HOMES  M/I Homes

Almost no diversification

The 3 months correlation between LANDSEA and M/I is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding LANDSEA HOMES P and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M/I Homes and LANDSEA 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 LANDSEA HOMES P are associated (or correlated) with M/I Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M/I Homes has no effect on the direction of LANDSEA HOMES i.e., LANDSEA HOMES and M/I Homes go up and down completely randomly.

Pair Corralation between LANDSEA HOMES and M/I Homes

Assuming the 90 days horizon LANDSEA HOMES is expected to generate 4.17 times less return on investment than M/I Homes. In addition to that, LANDSEA HOMES is 1.27 times more volatile than MI Homes. It trades about 0.01 of its total potential returns per unit of risk. MI Homes is currently generating about 0.07 per unit of volatility. If you would invest  8,000  in MI Homes on October 22, 2024 and sell it today you would earn a total of  5,270  from holding MI Homes or generate 65.87% return on investment over 90 days.

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

LANDSEA HOMES P  vs.  MI Homes

LANDSEA HOMES P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LANDSEA HOMES P 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.

M/I 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 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 LANDSEA HOMES and M/I Homes

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

The idea behind LANDSEA HOMES P and MI Homes 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.