Correlation Between Cairn Homes and BW Offshore
Can any of the company-specific risk be diversified away by investing in both Cairn Homes and BW Offshore 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 BW Offshore 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 BW Offshore, you can compare the effects of market volatilities on Cairn Homes and BW Offshore 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 BW Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairn Homes and BW Offshore.
Diversification Opportunities for Cairn Homes and BW Offshore
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cairn and 0RKH is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and BW Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore 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 BW Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Offshore has no effect on the direction of Cairn Homes i.e., Cairn Homes and BW Offshore go up and down completely randomly.
Pair Corralation between Cairn Homes and BW Offshore
Assuming the 90 days trading horizon Cairn Homes PLC is expected to under-perform the BW Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Cairn Homes PLC is 1.06 times less risky than BW Offshore. The stock trades about -0.04 of its potential returns per unit of risk. The BW Offshore is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,103 in BW Offshore on November 3, 2024 and sell it today you would earn a total of 45.00 from holding BW Offshore or generate 1.45% 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. BW Offshore
Performance |
| Timeline |
| Cairn Homes PLC |
| BW Offshore |
Cairn Homes and BW Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cairn Homes and BW Offshore
The main advantage of trading using opposite Cairn Homes and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairn Homes position performs unexpectedly, BW Offshore 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 BW Offshore will offset losses from the drop in BW Offshore's long position.| Cairn Homes vs. Optima Health plc | Cairn Homes vs. Primary Health Properties | Cairn Homes vs. Inspiration Healthcare Group | Cairn Homes vs. Planet Fitness Cl |
| BW Offshore vs. Young Cos Brewery | BW Offshore vs. European Metals Holdings | BW Offshore vs. Alien Metals | BW Offshore vs. Fevertree Drinks Plc |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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