Correlation Between MI Homes and Weyco

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

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

Diversification Opportunities for MI Homes and Weyco

0.35

Correlation Coefficient

MI Homes  Weyco

Weak diversification

The 3 months correlation between MHO and Weyco is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding MI Homes and Weyco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weyco Group 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 Weyco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weyco Group has no effect on the direction of MI Homes i.e., MI Homes and Weyco go up and down completely randomly.

Pair Corralation between MI Homes and Weyco

Considering the 90-day investment horizon MI Homes is expected to generate 1.25 times more return on investment than Weyco. However, MI Homes is 1.25 times more volatile than Weyco Group. It trades about 0.08 of its potential returns per unit of risk. Weyco Group is currently generating about 0.05 per unit of risk. If you would invest  9,480  in MI Homes on February 1, 2024 and sell it today you would earn a total of  2,142  from holding MI Homes or generate 22.59% return on investment over 90 days.

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

MI Homes  vs.  Weyco Group

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 fragile 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.

Weyco Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weyco Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile 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 Weyco

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

The idea behind MI Homes and Weyco Group 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..