Correlation Between MI Homes and Brandywine Realty

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

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

Diversification Opportunities for MI Homes and Brandywine Realty

0.52

Correlation Coefficient

MI Homes  Brandywine Realty

Very weak diversification

The 3 months correlation between MHO and Brandywine is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and Brandywine Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brandywine Realty Trust and MI 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 MI Homes are associated (or correlated) with Brandywine Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brandywine Realty Trust has no effect on the direction of MI Homes i.e., MI Homes and Brandywine Realty go up and down completely randomly.

Pair Corralation between MI Homes and Brandywine Realty

Considering the 90-day investment horizon MI Homes is expected to generate 1.71 times less return on investment than Brandywine Realty. But when comparing it to its historical volatility, MI Homes is 1.18 times less risky than Brandywine Realty. It trades about 0.06 of its potential returns per unit of risk. Brandywine Realty Trust is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  498.00  in Brandywine Realty Trust on September 4, 2024 and sell it today you would earn a total of  66.00  from holding Brandywine Realty Trust or generate 13.25% return on investment over 90 days.

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

MI Homes  vs.  Brandywine Realty Trust

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.

Brandywine Realty Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brandywine Realty Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Brandywine Realty displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MI Homes and Brandywine Realty

The main advantage of trading using opposite MI Homes and Brandywine Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MI Homes position performs unexpectedly, Brandywine Realty 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 Brandywine Realty will offset losses from the drop in Brandywine Realty's long position.

The idea behind MI Homes and Brandywine Realty Trust 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.