Correlation Between Baker Steel and Cairn Homes
Can any of the company-specific risk be diversified away by investing in both Baker Steel 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 Baker Steel and Cairn Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baker Steel Resources and Cairn Homes PLC, you can compare the effects of market volatilities on Baker Steel 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 Baker Steel with a short position of Cairn Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baker Steel and Cairn Homes.
Diversification Opportunities for Baker Steel and Cairn Homes
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Baker and Cairn is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Baker Steel Resources 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 Baker Steel 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 Baker Steel Resources 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 Baker Steel i.e., Baker Steel and Cairn Homes go up and down completely randomly.
Pair Corralation between Baker Steel and Cairn Homes
Assuming the 90 days trading horizon Baker Steel Resources is expected to generate 0.8 times more return on investment than Cairn Homes. However, Baker Steel Resources is 1.25 times less risky than Cairn Homes. It trades about 0.03 of its potential returns per unit of risk. Cairn Homes PLC is currently generating about -0.04 per unit of risk. If you would invest 5,600 in Baker Steel Resources on November 3, 2024 and sell it today you would earn a total of 50.00 from holding Baker Steel Resources or generate 0.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baker Steel Resources vs. Cairn Homes PLC
Performance |
| Timeline |
| Baker Steel Resources |
| Cairn Homes PLC |
Baker Steel and Cairn Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baker Steel and Cairn Homes
The main advantage of trading using opposite Baker Steel and Cairn Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baker Steel 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.| Baker Steel vs. Quadrise Plc | Baker Steel vs. ImmuPharma PLC | Baker Steel vs. Intuitive Investments Group | Baker Steel vs. European Metals Holdings |
| Cairn Homes vs. Rightmove PLC | Cairn Homes vs. Bioventix | Cairn Homes vs. Games Workshop Group | Cairn Homes vs. Auto Trader Group |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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