Correlation Between Capital Metals and Cairn Homes
Can any of the company-specific risk be diversified away by investing in both Capital Metals 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 Capital Metals and Cairn Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Metals PLC and Cairn Homes PLC, you can compare the effects of market volatilities on Capital Metals 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 Capital Metals with a short position of Cairn Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Metals and Cairn Homes.
Diversification Opportunities for Capital Metals and Cairn Homes
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Capital and Cairn is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Capital Metals PLC 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 Capital Metals 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 Capital Metals PLC 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 Capital Metals i.e., Capital Metals and Cairn Homes go up and down completely randomly.
Pair Corralation between Capital Metals and Cairn Homes
Assuming the 90 days trading horizon Capital Metals PLC is expected to generate 5.72 times more return on investment than Cairn Homes. However, Capital Metals is 5.72 times more volatile than Cairn Homes PLC. It trades about 0.03 of its potential returns per unit of risk. Cairn Homes PLC is currently generating about 0.11 per unit of risk. If you would invest 285.00 in Capital Metals PLC on October 25, 2024 and sell it today you would lose (120.00) from holding Capital Metals PLC or give up 42.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Capital Metals PLC vs. Cairn Homes PLC
Performance |
| Timeline |
| Capital Metals PLC |
| Cairn Homes PLC |
Capital Metals and Cairn Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Metals and Cairn Homes
The main advantage of trading using opposite Capital Metals and Cairn Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Metals 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.| Capital Metals vs. Abingdon Health Plc | Capital Metals vs. CVS Health Corp | Capital Metals vs. PureTech Health plc | Capital Metals vs. Sabre Insurance Group |
| Cairn Homes vs. Samsung Electronics Co | Cairn Homes vs. Samsung Electronics Co | Cairn Homes vs. Toyota Motor Corp | Cairn Homes vs. Reliance Industries Ltd |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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