Correlation Between Cairn Homes and Fortune Brands
Can any of the company-specific risk be diversified away by investing in both Cairn Homes and Fortune Brands 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 Fortune Brands 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 Fortune Brands Home, you can compare the effects of market volatilities on Cairn Homes and Fortune Brands 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 Fortune Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairn Homes and Fortune Brands.
Diversification Opportunities for Cairn Homes and Fortune Brands
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Cairn and Fortune is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and Fortune Brands Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Brands Home 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 Fortune Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Brands Home has no effect on the direction of Cairn Homes i.e., Cairn Homes and Fortune Brands go up and down completely randomly.
Pair Corralation between Cairn Homes and Fortune Brands
Assuming the 90 days trading horizon Cairn Homes PLC is expected to generate 0.85 times more return on investment than Fortune Brands. However, Cairn Homes PLC is 1.18 times less risky than Fortune Brands. It trades about 0.11 of its potential returns per unit of risk. Fortune Brands Home is currently generating about 0.06 per unit of risk. If you would invest 6,892 in Cairn Homes PLC on August 27, 2024 and sell it today you would earn a total of 10,608 from holding Cairn Homes PLC or generate 153.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 75.4% |
| Values | Daily Returns |
Cairn Homes PLC vs. Fortune Brands Home
Performance |
| Timeline |
| Cairn Homes PLC |
| Fortune Brands Home |
Cairn Homes and Fortune Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cairn Homes and Fortune Brands
The main advantage of trading using opposite Cairn Homes and Fortune Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairn Homes position performs unexpectedly, Fortune Brands 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 Fortune Brands will offset losses from the drop in Fortune Brands' long position.| Cairn Homes vs. Tungsten West PLC | Cairn Homes vs. Argo Group Limited | Cairn Homes vs. Hardide PLC | Cairn Homes vs. Versarien PLC |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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