Correlation Between Lumen Technologies and Cairn Homes
Can any of the company-specific risk be diversified away by investing in both Lumen Technologies and Cairn 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 Lumen Technologies and Cairn Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumen Technologies and Cairn Homes PLC, you can compare the effects of market volatilities on Lumen Technologies and Cairn 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 Lumen Technologies with a short position of Cairn Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumen Technologies and Cairn Homes.
Diversification Opportunities for Lumen Technologies and Cairn Homes
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lumen and Cairn is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Lumen Technologies and Cairn Homes PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cairn Homes PLC and Lumen Technologies 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 Lumen Technologies are associated (or correlated) with Cairn Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cairn Homes PLC has no effect on the direction of Lumen Technologies i.e., Lumen Technologies and Cairn Homes go up and down completely randomly.
Pair Corralation between Lumen Technologies and Cairn Homes
Assuming the 90 days trading horizon Lumen Technologies is expected to generate 2.66 times more return on investment than Cairn Homes. However, Lumen Technologies is 2.66 times more volatile than Cairn Homes PLC. It trades about 0.09 of its potential returns per unit of risk. Cairn Homes PLC is currently generating about 0.12 per unit of risk. If you would invest 550.00 in Lumen Technologies on September 5, 2024 and sell it today you would earn a total of 132.00 from holding Lumen Technologies or generate 24.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lumen Technologies vs. Cairn Homes PLC
Performance |
| Timeline |
| Lumen Technologies |
| Cairn Homes PLC |
Lumen Technologies and Cairn Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumen Technologies and Cairn Homes
The main advantage of trading using opposite Lumen Technologies and Cairn Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumen Technologies position performs unexpectedly, Cairn 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 Cairn Homes will offset losses from the drop in Cairn Homes' long position.| Lumen Technologies vs. Samsung Electronics Co | Lumen Technologies vs. Samsung Electronics Co | Lumen Technologies vs. Hyundai Motor | Lumen Technologies vs. Toyota Motor Corp |
| Cairn Homes vs. Walmart | Cairn Homes vs. BYD Co | Cairn Homes vs. Volkswagen AG | Cairn Homes vs. Volkswagen AG Non Vtg |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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