Correlation Between Daiwa Securities and MI Homes

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

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

Diversification Opportunities for Daiwa Securities and MI Homes

0.56

Correlation Coefficient

Daiwa Securities  MI Homes

Very weak diversification

The 3 months correlation between Daiwa and MHO is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Daiwa Securities Group and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MI Homes and Daiwa Securities 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 Daiwa Securities Group 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 Daiwa Securities i.e., Daiwa Securities and MI Homes go up and down completely randomly.

Pair Corralation between Daiwa Securities and MI Homes

Assuming the 90 days horizon Daiwa Securities Group is expected to generate 0.96 times more return on investment than MI Homes. However, Daiwa Securities Group is 1.04 times less risky than MI Homes. It trades about -0.17 of its potential returns per unit of risk. MI Homes is currently generating about -0.49 per unit of risk. If you would invest  693.00  in Daiwa Securities Group on October 6, 2024 and sell it today you would lose (43.00) from holding Daiwa Securities Group or give up 6.2% of portfolio value over 90 days.

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

Daiwa Securities Group  vs.  MI Homes

Daiwa Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daiwa Securities Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Daiwa Securities is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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. 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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Daiwa Securities and MI Homes

The main advantage of trading using opposite Daiwa Securities and MI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daiwa Securities 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 Daiwa Securities Group 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.