Correlation Between Skyline and MI Homes

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

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

Diversification Opportunities for Skyline and MI Homes

0.45

Correlation Coefficient

Skyline  MI Homes

Very weak diversification

The 3 months correlation between Skyline and MHO is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Skyline and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MI Homes and Skyline 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 Skyline are associated (or correlated) with MI Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MI Homes has no effect on the direction of Skyline i.e., Skyline and MI Homes go up and down completely randomly.

Pair Corralation between Skyline and MI Homes

Considering the 90-day investment horizon Skyline is expected to generate 0.66 times more return on investment than MI Homes. However, Skyline is 1.52 times less risky than MI Homes. It trades about 0.44 of its potential returns per unit of risk. MI Homes is currently generating about 0.14 per unit of risk. If you would invest  8,944  in Skyline on August 30, 2024 and sell it today you would earn a total of  1,429  from holding Skyline or generate 15.98% return on investment over 90 days.

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

Skyline  vs.  MI Homes

Skyline

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Skyline are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward-looking signals, Skyline may actually be approaching a critical reversion point that can send shares even higher in December 2024.

MI Homes

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MI Homes are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, MI Homes is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Skyline and MI Homes

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

The idea behind Skyline 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.

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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.