Correlation Between Cairn Homes and Home Depot
Can any of the company-specific risk be diversified away by investing in both Cairn Homes and Home Depot 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 Home Depot 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 Home Depot, you can compare the effects of market volatilities on Cairn Homes and Home Depot 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 Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairn Homes and Home Depot.
Diversification Opportunities for Cairn Homes and Home Depot
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Cairn and Home is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot 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 Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Cairn Homes i.e., Cairn Homes and Home Depot go up and down completely randomly.
Pair Corralation between Cairn Homes and Home Depot
Assuming the 90 days trading horizon Cairn Homes PLC is expected to under-perform the Home Depot. In addition to that, Cairn Homes is 6.19 times more volatile than Home Depot. It trades about -0.19 of its total potential returns per unit of risk. Home Depot is currently generating about 0.21 per unit of volatility. If you would invest 17,632 in Home Depot on August 31, 2024 and sell it today you would earn a total of 225.00 from holding Home Depot or generate 1.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cairn Homes PLC vs. Home Depot
Performance |
| Timeline |
| Cairn Homes PLC |
| Home Depot |
Cairn Homes and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cairn Homes and Home Depot
The main advantage of trading using opposite Cairn Homes and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairn Homes position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.| Cairn Homes vs. Alfa Financial Software | Cairn Homes vs. Check Point Software | Cairn Homes vs. GreenX Metals | Cairn Homes vs. Wheaton Precious Metals |
| Home Depot vs. Berkshire Hathaway | Home Depot vs. Hyundai Motor | Home Depot vs. Samsung Electronics Co | Home Depot vs. Samsung Electronics Co |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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