Correlation Between SLR Investment and MI Homes

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

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

Diversification Opportunities for SLR Investment and MI Homes

-0.08

Correlation Coefficient

SLR Investment  MI Homes

Good diversification

The 3 months correlation between SLR and 4MI is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding SLR Investment Corp and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MI Homes and SLR Investment 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 SLR Investment Corp 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 SLR Investment i.e., SLR Investment and MI Homes go up and down completely randomly.

Pair Corralation between SLR Investment and MI Homes

Assuming the 90 days horizon SLR Investment is expected to generate 2.82 times less return on investment than MI Homes. But when comparing it to its historical volatility, SLR Investment Corp is 1.91 times less risky than MI Homes. It trades about 0.06 of its potential returns per unit of risk. MI Homes is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,880  in MI Homes on October 4, 2024 and sell it today you would earn a total of  7,925  from holding MI Homes or generate 162.4% return on investment over 90 days.

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

SLR Investment Corp  vs.  MI Homes

SLR Investment Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SLR Investment Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SLR Investment reported solid returns over the last few months and may actually be approaching a breakup point.

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with SLR Investment and MI Homes

The main advantage of trading using opposite SLR Investment and MI Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SLR Investment 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 SLR Investment Corp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.