Correlation Between Skyline and MI Homes

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

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

Diversification Opportunities for Skyline and MI Homes

-0.53

Correlation Coefficient

Skyline  MI Homes

Excellent diversification

The 3 months correlation between Skyline and MHO is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Skyline and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MI Homes and Skyline 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 Skyline 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 Skyline i.e., Skyline and MI Homes go up and down completely randomly.

Pair Corralation between Skyline and MI Homes

Considering the 90-day investment horizon Skyline is expected to generate 1.29 times more return on investment than MI Homes. However, Skyline is 1.29 times more volatile than MI Homes. It trades about 0.07 of its potential returns per unit of risk. MI Homes is currently generating about -0.11 per unit of risk. If you would invest  8,970  in Skyline on December 26, 2024 and sell it today you would earn a total of  817.00  from holding Skyline or generate 9.11% return on investment over 90 days.

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

Skyline  vs.  MI Homes

Skyline

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Skyline are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward-looking signals, Skyline may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 uncertain performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Skyline and MI Homes

The main advantage of trading using opposite Skyline and MI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skyline 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 Skyline 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.