Correlation Between Cairn Homes and Draper Esprit
Can any of the company-specific risk be diversified away by investing in both Cairn Homes and Draper Esprit 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 Cairn Homes and Draper Esprit into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cairn Homes PLC and Draper Esprit plc, you can compare the effects of market volatilities on Cairn Homes and Draper Esprit 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 Cairn Homes with a short position of Draper Esprit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairn Homes and Draper Esprit.
Diversification Opportunities for Cairn Homes and Draper Esprit
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cairn and Draper is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and Draper Esprit plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Draper Esprit plc and Cairn 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 Cairn Homes PLC are associated (or correlated) with Draper Esprit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Draper Esprit plc has no effect on the direction of Cairn Homes i.e., Cairn Homes and Draper Esprit go up and down completely randomly.
Pair Corralation between Cairn Homes and Draper Esprit
Assuming the 90 days trading horizon Cairn Homes PLC is expected to generate 0.73 times more return on investment than Draper Esprit. However, Cairn Homes PLC is 1.36 times less risky than Draper Esprit. It trades about 0.12 of its potential returns per unit of risk. Draper Esprit plc is currently generating about 0.04 per unit of risk. If you would invest 130.00 in Cairn Homes PLC on September 4, 2024 and sell it today you would earn a total of 83.00 from holding Cairn Homes PLC or generate 63.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cairn Homes PLC vs. Draper Esprit plc
Performance |
| Timeline |
| Cairn Homes PLC |
| Draper Esprit plc |
Cairn Homes and Draper Esprit Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cairn Homes and Draper Esprit
The main advantage of trading using opposite Cairn Homes and Draper Esprit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairn Homes position performs unexpectedly, Draper Esprit 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 Draper Esprit will offset losses from the drop in Draper Esprit's long position.| Cairn Homes vs. Glenveagh Properties PLC | Cairn Homes vs. AIB Group PLC | Cairn Homes vs. Dalata Hotel Group | Cairn Homes vs. Bank of Ireland |
| Draper Esprit vs. Bank of Ireland | Draper Esprit vs. Ryanair Holdings plc | Draper Esprit vs. Cairn Homes PLC |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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