Correlation Between MI Homes and SL Green

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

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

Diversification Opportunities for MI Homes and SL Green

-0.31

Correlation Coefficient

MI Homes  SL Green

Very good diversification

The 3 months correlation between MHO and SLG is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and SL Green Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SL Green Realty 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 SL Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SL Green Realty has no effect on the direction of MI Homes i.e., MI Homes and SL Green go up and down completely randomly.

Pair Corralation between MI Homes and SL Green

Considering the 90-day investment horizon MI Homes is expected to generate 1.58 times less return on investment than SL Green. But when comparing it to its historical volatility, MI Homes is 1.33 times less risky than SL Green. It trades about 0.1 of its potential returns per unit of risk. SL Green Realty is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,085  in SL Green Realty on September 14, 2024 and sell it today you would earn a total of  5,273  from holding SL Green Realty or generate 252.9% return on investment over 90 days.

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

MI Homes  vs.  SL Green Realty

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.

SL Green Realty

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SL Green Realty are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, SL Green is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MI Homes and SL Green

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

The idea behind MI Homes and SL Green Realty 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.