Correlation Between Cairn Homes and Fortuna Silver
Can any of the company-specific risk be diversified away by investing in both Cairn Homes and Fortuna Silver 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 Fortuna Silver 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 Fortuna Silver Mines, you can compare the effects of market volatilities on Cairn Homes and Fortuna Silver 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 Fortuna Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairn Homes and Fortuna Silver.
Diversification Opportunities for Cairn Homes and Fortuna Silver
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Cairn and Fortuna is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and Fortuna Silver Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortuna Silver Mines 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 Fortuna Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortuna Silver Mines has no effect on the direction of Cairn Homes i.e., Cairn Homes and Fortuna Silver go up and down completely randomly.
Pair Corralation between Cairn Homes and Fortuna Silver
Assuming the 90 days trading horizon Cairn Homes PLC is expected to under-perform the Fortuna Silver. But the stock apears to be less risky and, when comparing its historical volatility, Cairn Homes PLC is 2.21 times less risky than Fortuna Silver. The stock trades about -0.07 of its potential returns per unit of risk. The Fortuna Silver Mines is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 653.00 in Fortuna Silver Mines on November 6, 2024 and sell it today you would earn a total of 104.00 from holding Fortuna Silver Mines or generate 15.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 52.38% |
| Values | Daily Returns |
Cairn Homes PLC vs. Fortuna Silver Mines
Performance |
| Timeline |
| Cairn Homes PLC |
| Fortuna Silver Mines |
Cairn Homes and Fortuna Silver Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cairn Homes and Fortuna Silver
The main advantage of trading using opposite Cairn Homes and Fortuna Silver positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairn Homes position performs unexpectedly, Fortuna Silver 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 Fortuna Silver will offset losses from the drop in Fortuna Silver's long position.| Cairn Homes vs. Universal Health Services | Cairn Homes vs. Naturhouse Health SA | Cairn Homes vs. EJF Investments | Cairn Homes vs. Cardinal Health |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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