Correlation Between Jacquet Metal and M/I Homes

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

Diversification Opportunities for Jacquet Metal and M/I Homes

0.27

Correlation Coefficient

Jacquet Metal  M/I Homes

Modest diversification

The 3 months correlation between Jacquet and M/I is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Jacquet Metal Service and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M/I Homes and Jacquet Metal 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 Jacquet Metal Service 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 Jacquet Metal i.e., Jacquet Metal and M/I Homes go up and down completely randomly.

Pair Corralation between Jacquet Metal and M/I Homes

Assuming the 90 days horizon Jacquet Metal is expected to generate 6.59 times less return on investment than M/I Homes. But when comparing it to its historical volatility, Jacquet Metal Service is 1.46 times less risky than M/I Homes. It trades about 0.01 of its potential returns per unit of risk. MI Homes is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  14,295  in MI Homes on September 1, 2024 and sell it today you would earn a total of  1,180  from holding MI Homes or generate 8.25% return on investment over 90 days.

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

Jacquet Metal Service  vs.  MI Homes

Jacquet Metal Service

Risk-Adjusted Performance

1 of 100

Weak

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

M/I Homes

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MI Homes are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, M/I Homes may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Jacquet Metal and M/I Homes

The main advantage of trading using opposite Jacquet Metal and M/I Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jacquet Metal 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 Jacquet Metal Service 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.