Correlation Between Consolidated Communications and M/I Homes

Can any of the company-specific risk be diversified away by investing in both Consolidated Communications 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 Consolidated Communications 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 Consolidated Communications Holdings and MI Homes, you can compare the effects of market volatilities on Consolidated Communications 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 Consolidated Communications with a short position of M/I Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Communications and M/I Homes.

Diversification Opportunities for Consolidated Communications and M/I Homes

0.06

Correlation Coefficient

Consolidated Communications  M/I Homes

Significant diversification

The 3 months correlation between Consolidated and M/I is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Communications Ho and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M/I Homes and Consolidated Communications 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 Consolidated Communications Holdings 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 Consolidated Communications i.e., Consolidated Communications and M/I Homes go up and down completely randomly.

Pair Corralation between Consolidated Communications and M/I Homes

Assuming the 90 days horizon Consolidated Communications is expected to generate 2.07 times less return on investment than M/I Homes. But when comparing it to its historical volatility, Consolidated Communications Holdings is 2.93 times less risky than M/I Homes. It trades about 0.1 of its potential returns per unit of risk. MI Homes is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  11,125  in MI Homes on September 22, 2024 and sell it today you would earn a total of  2,450  from holding MI Homes or generate 22.02% return on investment over 90 days.

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

Consolidated Communications Ho  vs.  MI Homes

Consolidated Communications

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Consolidated Communications Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Consolidated Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 unsteady 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 Consolidated Communications and M/I Homes

The main advantage of trading using opposite Consolidated Communications and M/I Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Communications 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 Consolidated Communications Holdings 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.