Correlation Between BH Macro and Cairn Homes
Can any of the company-specific risk be diversified away by investing in both BH Macro 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 BH Macro and Cairn Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BH Macro Limited and Cairn Homes PLC, you can compare the effects of market volatilities on BH Macro 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 BH Macro with a short position of Cairn Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of BH Macro and Cairn Homes.
Diversification Opportunities for BH Macro and Cairn Homes
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BHMG and Cairn is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding BH Macro Limited 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 BH Macro 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 BH Macro Limited 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 BH Macro i.e., BH Macro and Cairn Homes go up and down completely randomly.
Pair Corralation between BH Macro and Cairn Homes
Assuming the 90 days trading horizon BH Macro Limited is expected to under-perform the Cairn Homes. But the stock apears to be less risky and, when comparing its historical volatility, BH Macro Limited is 1.52 times less risky than Cairn Homes. The stock trades about -0.01 of its potential returns per unit of risk. The Cairn Homes PLC is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 6,713 in Cairn Homes PLC on August 30, 2024 and sell it today you would earn a total of 10,447 from holding Cairn Homes PLC or generate 155.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
BH Macro Limited vs. Cairn Homes PLC
Performance |
| Timeline |
| BH Macro Limited |
| Cairn Homes PLC |
BH Macro and Cairn Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BH Macro and Cairn Homes
The main advantage of trading using opposite BH Macro and Cairn Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BH Macro 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.| BH Macro vs. Fortune Brands Home | BH Macro vs. OneSavings Bank PLC | BH Macro vs. Pacific Horizon Investment | BH Macro vs. Cairn Homes PLC |
| Cairn Homes vs. Ondine Biomedical | Cairn Homes vs. Europa Metals | Cairn Homes vs. Lendinvest PLC | Cairn Homes vs. Neometals |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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