Correlation Between Arcosa and MI Homes

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

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

Diversification Opportunities for Arcosa and MI Homes

0.61

Correlation Coefficient

Arcosa  MI Homes

Poor diversification

The 3 months correlation between Arcosa and MHO is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Arcosa Inc and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MI Homes and Arcosa 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 Arcosa Inc are associated (or correlated) with MI Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MI Homes has no effect on the direction of Arcosa i.e., Arcosa and MI Homes go up and down completely randomly.

Pair Corralation between Arcosa and MI Homes

Considering the 90-day investment horizon Arcosa Inc is expected to under-perform the MI Homes. In addition to that, Arcosa is 1.04 times more volatile than MI Homes. It trades about -0.16 of its total potential returns per unit of risk. MI Homes is currently generating about -0.11 per unit of volatility. If you would invest  13,417  in MI Homes on December 23, 2024 and sell it today you would lose (1,829) from holding MI Homes or give up 13.63% of portfolio value over 90 days.

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

Arcosa Inc  vs.  MI Homes

Arcosa Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arcosa Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

MI 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. In spite of inconsistent performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Arcosa and MI Homes

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

The idea behind Arcosa Inc 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.