Correlation Between Cairn Homes and Capital Drilling
Can any of the company-specific risk be diversified away by investing in both Cairn Homes and Capital Drilling 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 Capital Drilling 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 Capital Drilling, you can compare the effects of market volatilities on Cairn Homes and Capital Drilling 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 Capital Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairn Homes and Capital Drilling.
Diversification Opportunities for Cairn Homes and Capital Drilling
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cairn and Capital is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and Capital Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Drilling 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 Capital Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Drilling has no effect on the direction of Cairn Homes i.e., Cairn Homes and Capital Drilling go up and down completely randomly.
Pair Corralation between Cairn Homes and Capital Drilling
Assuming the 90 days trading horizon Cairn Homes PLC is expected to generate 0.67 times more return on investment than Capital Drilling. However, Cairn Homes PLC is 1.5 times less risky than Capital Drilling. It trades about -0.01 of its potential returns per unit of risk. Capital Drilling is currently generating about -0.05 per unit of risk. If you would invest 18,300 in Cairn Homes PLC on October 26, 2024 and sell it today you would lose (300.00) from holding Cairn Homes PLC or give up 1.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cairn Homes PLC vs. Capital Drilling
Performance |
| Timeline |
| Cairn Homes PLC |
| Capital Drilling |
Cairn Homes and Capital Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cairn Homes and Capital Drilling
The main advantage of trading using opposite Cairn Homes and Capital Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairn Homes position performs unexpectedly, Capital Drilling 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 Capital Drilling will offset losses from the drop in Capital Drilling's long position.| Cairn Homes vs. Samsung Electronics Co | Cairn Homes vs. Samsung Electronics Co | Cairn Homes vs. Toyota Motor Corp | Cairn Homes vs. MOL Hungarian Oil |
| Capital Drilling vs. Pets at Home | Capital Drilling vs. Cairn Homes PLC | Capital Drilling vs. International Biotechnology Trust | Capital Drilling vs. Gruppo MutuiOnline SpA |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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