Correlation Between MI Homes and Jacobs Solutions

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

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

Diversification Opportunities for MI Homes and Jacobs Solutions

-0.03

Correlation Coefficient

MI Homes  Jacobs Solutions

Good diversification

The 3 months correlation between MHO and Jacobs is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions and MI Homes 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 MI Homes are associated (or correlated) with Jacobs Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jacobs Solutions has no effect on the direction of MI Homes i.e., MI Homes and Jacobs Solutions go up and down completely randomly.

Pair Corralation between MI Homes and Jacobs Solutions

Considering the 90-day investment horizon MI Homes is expected to generate 1.71 times more return on investment than Jacobs Solutions. However, MI Homes is 1.71 times more volatile than Jacobs Solutions. It trades about 0.08 of its potential returns per unit of risk. Jacobs Solutions is currently generating about 0.05 per unit of risk. If you would invest  6,100  in MI Homes on September 26, 2024 and sell it today you would earn a total of  7,511  from holding MI Homes or generate 123.13% return on investment over 90 days.

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

MI Homes  vs.  Jacobs Solutions

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

Jacobs Solutions

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jacobs Solutions are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady forward-looking indicators, Jacobs Solutions is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with MI Homes and Jacobs Solutions

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

The idea behind MI Homes and Jacobs Solutions 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.