Correlation Between HEMISPHERE EGY and M/I Homes

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

Diversification Opportunities for HEMISPHERE EGY and M/I Homes

-0.02

Correlation Coefficient

HEMISPHERE EGY  M/I Homes

Good diversification

The 3 months correlation between HEMISPHERE and M/I is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding HEMISPHERE EGY and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M/I Homes and HEMISPHERE EGY 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 HEMISPHERE EGY 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 HEMISPHERE EGY i.e., HEMISPHERE EGY and M/I Homes go up and down completely randomly.

Pair Corralation between HEMISPHERE EGY and M/I Homes

Assuming the 90 days trading horizon HEMISPHERE EGY is expected to generate 0.9 times more return on investment than M/I Homes. However, HEMISPHERE EGY is 1.11 times less risky than M/I Homes. It trades about 0.11 of its potential returns per unit of risk. MI Homes is currently generating about -0.03 per unit of risk. If you would invest  121.00  in HEMISPHERE EGY on September 20, 2024 and sell it today you would earn a total of  5.00  from holding HEMISPHERE EGY or generate 4.13% return on investment over 90 days.

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

HEMISPHERE EGY  vs.  MI Homes

HEMISPHERE EGY

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HEMISPHERE EGY are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, HEMISPHERE EGY may actually be approaching a critical reversion point that can send shares even higher in January 2025.

M/I 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. Despite nearly stable basic indicators, M/I Homes is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HEMISPHERE EGY and M/I Homes

The main advantage of trading using opposite HEMISPHERE EGY and M/I Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HEMISPHERE EGY 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 HEMISPHERE EGY 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.