Correlation Between MI Homes and SIMPPLE

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

By analyzing existing cross correlation between MI Homes and SIMPPLE LTD Ordinary, you can compare the effects of market volatilities on MI Homes and SIMPPLE 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 SIMPPLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of MI Homes and SIMPPLE.

Diversification Opportunities for MI Homes and SIMPPLE

0.66

Correlation Coefficient

MI Homes  SIMPPLE

Poor diversification

The 3 months correlation between MHO and SIMPPLE is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and SIMPPLE LTD Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMPPLE LTD Ordinary 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 SIMPPLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMPPLE LTD Ordinary has no effect on the direction of MI Homes i.e., MI Homes and SIMPPLE go up and down completely randomly.

Pair Corralation between MI Homes and SIMPPLE

Considering the 90-day investment horizon MI Homes is expected to generate 0.22 times more return on investment than SIMPPLE. However, MI Homes is 4.58 times less risky than SIMPPLE. It trades about -0.09 of its potential returns per unit of risk. SIMPPLE LTD Ordinary is currently generating about -0.07 per unit of risk. If you would invest  13,397  in MI Homes on December 27, 2024 and sell it today you would lose (1,604) from holding MI Homes or give up 11.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

MI Homes  vs.  SIMPPLE LTD Ordinary

MI 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. In spite of latest inconsistent performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

SIMPPLE LTD Ordinary

Risk-Adjusted Performance

Very Weak

Over the last 90 days SIMPPLE LTD Ordinary has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with MI Homes and SIMPPLE

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

The idea behind MI Homes and SIMPPLE LTD Ordinary 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.