Correlation Between DATATEC and M/I Homes

Can any of the company-specific risk be diversified away by investing in both DATATEC 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 DATATEC 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 DATATEC LTD 2 and MI Homes, you can compare the effects of market volatilities on DATATEC 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 DATATEC with a short position of M/I Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of DATATEC and M/I Homes.

Diversification Opportunities for DATATEC and M/I Homes

-0.51

Correlation Coefficient

DATATEC  M/I Homes

Excellent diversification

The 3 months correlation between DATATEC and M/I is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding DATATEC LTD 2 and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M/I Homes and DATATEC 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 DATATEC LTD 2 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 DATATEC i.e., DATATEC and M/I Homes go up and down completely randomly.

Pair Corralation between DATATEC and M/I Homes

Assuming the 90 days trading horizon DATATEC LTD 2 is expected to generate 1.08 times more return on investment than M/I Homes. However, DATATEC is 1.08 times more volatile than MI Homes. It trades about 0.05 of its potential returns per unit of risk. MI Homes is currently generating about -0.17 per unit of risk. If you would invest  452.00  in DATATEC LTD 2 on December 22, 2024 and sell it today you would earn a total of  24.00  from holding DATATEC LTD 2 or generate 5.31% return on investment over 90 days.

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

DATATEC LTD 2  vs.  MI Homes

DATATEC LTD 2

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DATATEC LTD 2 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, DATATEC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with DATATEC and M/I Homes

The main advantage of trading using opposite DATATEC and M/I Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DATATEC 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 DATATEC LTD 2 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.