Correlation Between Scandic Hotels and Cairn Homes
Can any of the company-specific risk be diversified away by investing in both Scandic Hotels 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 Scandic Hotels and Cairn Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Scandic Hotels Group and Cairn Homes PLC, you can compare the effects of market volatilities on Scandic Hotels 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 Scandic Hotels with a short position of Cairn Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandic Hotels and Cairn Homes.
Diversification Opportunities for Scandic Hotels and Cairn Homes
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Scandic and Cairn is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Scandic Hotels Group 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 Scandic Hotels 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 Scandic Hotels Group 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 Scandic Hotels i.e., Scandic Hotels and Cairn Homes go up and down completely randomly.
Pair Corralation between Scandic Hotels and Cairn Homes
Assuming the 90 days trading horizon Scandic Hotels is expected to generate 2.1 times less return on investment than Cairn Homes. But when comparing it to its historical volatility, Scandic Hotels Group is 1.09 times less risky than Cairn Homes. It trades about 0.05 of its potential returns per unit of risk. Cairn Homes PLC is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 14,225 in Cairn Homes PLC on September 3, 2024 and sell it today you would earn a total of 2,875 from holding Cairn Homes PLC or generate 20.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Scandic Hotels Group vs. Cairn Homes PLC
Performance |
| Timeline |
| Scandic Hotels Group |
| Cairn Homes PLC |
Scandic Hotels and Cairn Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scandic Hotels and Cairn Homes
The main advantage of trading using opposite Scandic Hotels and Cairn Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandic Hotels 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.| Scandic Hotels vs. Sealed Air Corp | Scandic Hotels vs. Alaska Air Group | Scandic Hotels vs. Charter Communications Cl | Scandic Hotels vs. Zegona Communications Plc |
| Cairn Homes vs. Rockfire Resources plc | Cairn Homes vs. Tlou Energy | Cairn Homes vs. Falcon Oil Gas | Cairn Homes vs. Helium One Global |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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