Correlation Between MI Homes and KIMBERLY

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

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

Diversification Opportunities for MI Homes and KIMBERLY

-0.02

Correlation Coefficient

MI Homes  KIMBERLY

Good diversification

The 3 months correlation between MHO and KIMBERLY is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and KIMBERLY CLARK P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KIMBERLY CLARK P 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 KIMBERLY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KIMBERLY CLARK P has no effect on the direction of MI Homes i.e., MI Homes and KIMBERLY go up and down completely randomly.

Pair Corralation between MI Homes and KIMBERLY

Considering the 90-day investment horizon MI Homes is expected to generate 1.66 times more return on investment than KIMBERLY. However, MI Homes is 1.66 times more volatile than KIMBERLY CLARK P. It trades about -0.05 of its potential returns per unit of risk. KIMBERLY CLARK P is currently generating about -0.25 per unit of risk. If you would invest  16,671  in MI Homes on September 17, 2024 and sell it today you would lose (1,484) from holding MI Homes or give up 8.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	52.31%
Values	Daily Returns

MI Homes  vs.  KIMBERLY CLARK P

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 latest uncertain performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

KIMBERLY CLARK P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KIMBERLY CLARK P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for KIMBERLY CLARK P investors.

Pair Trading with MI Homes and KIMBERLY

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

The idea behind MI Homes and KIMBERLY CLARK P 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.