Correlation Between Lakeland Industries and MI Homes

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

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

Diversification Opportunities for Lakeland Industries and MI Homes

-0.58

Correlation Coefficient

Lakeland Industries  MI Homes

Excellent diversification

The 3 months correlation between Lakeland and MHO is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Lakeland Industries and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MI Homes and Lakeland Industries 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 Lakeland Industries 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 Lakeland Industries i.e., Lakeland Industries and MI Homes go up and down completely randomly.

Pair Corralation between Lakeland Industries and MI Homes

Given the investment horizon of 90 days Lakeland Industries is expected to generate 1.42 times more return on investment than MI Homes. However, Lakeland Industries is 1.42 times more volatile than MI Homes. It trades about 0.23 of its potential returns per unit of risk. MI Homes is currently generating about -0.53 per unit of risk. If you would invest  2,308  in Lakeland Industries on October 5, 2024 and sell it today you would earn a total of  281.00  from holding Lakeland Industries or generate 12.18% return on investment over 90 days.

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

Lakeland Industries  vs.  MI Homes

Lakeland Industries

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lakeland Industries are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward-looking signals, Lakeland Industries exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Lakeland Industries and MI Homes

The main advantage of trading using opposite Lakeland Industries and MI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lakeland Industries 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 Lakeland Industries 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.