Correlation Between Cairn Homes and Adriatic Metals
Can any of the company-specific risk be diversified away by investing in both Cairn Homes and Adriatic Metals 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 Adriatic Metals 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 Adriatic Metals, you can compare the effects of market volatilities on Cairn Homes and Adriatic Metals 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 Adriatic Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairn Homes and Adriatic Metals.
Diversification Opportunities for Cairn Homes and Adriatic Metals
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cairn and Adriatic is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and Adriatic Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adriatic Metals 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 Adriatic Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adriatic Metals has no effect on the direction of Cairn Homes i.e., Cairn Homes and Adriatic Metals go up and down completely randomly.
Pair Corralation between Cairn Homes and Adriatic Metals
Assuming the 90 days trading horizon Cairn Homes is expected to generate 11.38 times less return on investment than Adriatic Metals. But when comparing it to its historical volatility, Cairn Homes PLC is 1.45 times less risky than Adriatic Metals. It trades about 0.03 of its potential returns per unit of risk. Adriatic Metals is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 19,100 in Adriatic Metals on November 9, 2024 and sell it today you would earn a total of 2,300 from holding Adriatic Metals or generate 12.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cairn Homes PLC vs. Adriatic Metals
Performance |
| Timeline |
| Cairn Homes PLC |
| Adriatic Metals |
Cairn Homes and Adriatic Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cairn Homes and Adriatic Metals
The main advantage of trading using opposite Cairn Homes and Adriatic Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairn Homes position performs unexpectedly, Adriatic Metals 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 Adriatic Metals will offset losses from the drop in Adriatic Metals' long position.| Cairn Homes vs. Spirent Communications plc | Cairn Homes vs. Atalaya Mining | Cairn Homes vs. Coeur Mining | Cairn Homes vs. Fulcrum Metals PLC |
| Adriatic Metals vs. First Class Metals | Adriatic Metals vs. Fulcrum Metals PLC | Adriatic Metals vs. URU Metals | Adriatic Metals vs. Cornish Metals |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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