Correlation Between Cairn Homes and Prudential Financial

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Cairn Homes and Prudential Financial 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 Prudential Financial 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 Prudential Financial, you can compare the effects of market volatilities on Cairn Homes and Prudential Financial 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 Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairn Homes and Prudential Financial.

Diversification Opportunities for Cairn Homes and Prudential Financial

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Cairn and Prudential is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial 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 Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of Cairn Homes i.e., Cairn Homes and Prudential Financial go up and down completely randomly.

Pair Corralation between Cairn Homes and Prudential Financial

Assuming the 90 days trading horizon Cairn Homes PLC is expected to generate 1.43 times more return on investment than Prudential Financial. However, Cairn Homes is 1.43 times more volatile than Prudential Financial. It trades about -0.04 of its potential returns per unit of risk. Prudential Financial is currently generating about -0.09 per unit of risk. If you would invest  18,620  in Cairn Homes PLC on September 12, 2024 and sell it today you would lose (380.00) from holding Cairn Homes PLC or give up 2.04% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Cairn Homes PLC  vs.  Prudential Financial

 Performance 
       Timeline  
Cairn Homes PLC 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Cairn Homes PLC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Cairn Homes exhibited solid returns over the last few months and may actually be approaching a breakup point.
Prudential Financial 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Prudential Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cairn Homes and Prudential Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cairn Homes and Prudential Financial

The main advantage of trading using opposite Cairn Homes and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairn Homes position performs unexpectedly, Prudential Financial 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 Prudential Financial will offset losses from the drop in Prudential Financial's long position.
The idea behind Cairn Homes PLC and Prudential Financial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

Other Complementary Tools

Money Flow Index
Determine momentum by analyzing Money Flow Index and other technical indicators
Bond Analysis
Evaluate and analyze corporate bonds as a potential investment for your portfolios.
Price Exposure Probability
Analyze equity upside and downside potential for a given time horizon across multiple markets
Theme Ratings
Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance
Economic Indicators
Top statistical indicators that provide insights into how an economy is performing