Correlation Between Cairn Homes and Summit Materials
Can any of the company-specific risk be diversified away by investing in both Cairn Homes and Summit Materials 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 Summit Materials 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 Summit Materials Cl, you can compare the effects of market volatilities on Cairn Homes and Summit Materials 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 Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairn Homes and Summit Materials.
Diversification Opportunities for Cairn Homes and Summit Materials
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cairn and Summit is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and Summit Materials Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials 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 Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of Cairn Homes i.e., Cairn Homes and Summit Materials go up and down completely randomly.
Pair Corralation between Cairn Homes and Summit Materials
Assuming the 90 days trading horizon Cairn Homes PLC is expected to generate 0.79 times more return on investment than Summit Materials. However, Cairn Homes PLC is 1.27 times less risky than Summit Materials. It trades about 0.12 of its potential returns per unit of risk. Summit Materials Cl is currently generating about 0.07 per unit of risk. If you would invest 9,000 in Cairn Homes PLC on September 19, 2024 and sell it today you would earn a total of 10,060 from holding Cairn Homes PLC or generate 111.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.75% |
| Values | Daily Returns |
Cairn Homes PLC vs. Summit Materials Cl
Performance |
| Timeline |
| Cairn Homes PLC |
| Summit Materials |
Cairn Homes and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cairn Homes and Summit Materials
The main advantage of trading using opposite Cairn Homes and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairn Homes position performs unexpectedly, Summit Materials 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 Summit Materials will offset losses from the drop in Summit Materials' long position.| Cairn Homes vs. Home Depot | Cairn Homes vs. Weiss Korea Opportunity | Cairn Homes vs. River and Mercantile | Cairn Homes vs. Chrysalis Investments |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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