Correlation Between United Homes and MI Homes

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

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

Diversification Opportunities for United Homes and MI Homes

0.1

Correlation Coefficient

United Homes  MI Homes

Average diversification

The 3 months correlation between United and MHO is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding United Homes Group and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MI Homes and United 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 United Homes Group 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 United Homes i.e., United Homes and MI Homes go up and down completely randomly.

Pair Corralation between United Homes and MI Homes

Considering the 90-day investment horizon United Homes is expected to generate 1.16 times less return on investment than MI Homes. In addition to that, United Homes is 1.9 times more volatile than MI Homes. It trades about 0.08 of its total potential returns per unit of risk. MI Homes is currently generating about 0.17 per unit of volatility. If you would invest  15,591  in MI Homes on September 4, 2024 and sell it today you would earn a total of  1,206  from holding MI Homes or generate 7.74% return on investment over 90 days.

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

United Homes Group  vs.  MI Homes

United Homes Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Homes Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, United Homes is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

MI Homes

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MI Homes are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical indicators, MI Homes may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with United Homes and MI Homes

The main advantage of trading using opposite United Homes and MI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Homes 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 United Homes Group 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.