Correlation Between MI Homes and Haverty Furniture

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

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

Diversification Opportunities for MI Homes and Haverty Furniture

0.67

Correlation Coefficient

MI Homes  Haverty Furniture

Poor diversification

The 3 months correlation between MHO and Haverty is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and Haverty Furniture Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haverty Furniture 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 Haverty Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haverty Furniture has no effect on the direction of MI Homes i.e., MI Homes and Haverty Furniture go up and down completely randomly.

Pair Corralation between MI Homes and Haverty Furniture

Considering the 90-day investment horizon MI Homes is expected to generate 4.66 times less return on investment than Haverty Furniture. But when comparing it to its historical volatility, MI Homes is 1.14 times less risky than Haverty Furniture. It trades about 0.02 of its potential returns per unit of risk. Haverty Furniture Companies is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,220  in Haverty Furniture Companies on September 15, 2024 and sell it today you would earn a total of  72.00  from holding Haverty Furniture Companies or generate 3.24% return on investment over 90 days.

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

MI Homes  vs.  Haverty Furniture Companies

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. In spite of very healthy technical indicators, MI Homes is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Haverty Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Haverty Furniture Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with MI Homes and Haverty Furniture

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

The idea behind MI Homes and Haverty Furniture Companies 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.