Correlation Between Cairn Homes and Empire Metals
Can any of the company-specific risk be diversified away by investing in both Cairn Homes and Empire 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 Empire 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 Empire Metals Limited, you can compare the effects of market volatilities on Cairn Homes and Empire 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 Empire Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairn Homes and Empire Metals.
Diversification Opportunities for Cairn Homes and Empire Metals
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cairn and Empire is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and Empire Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Metals Limited 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 Empire Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Metals Limited has no effect on the direction of Cairn Homes i.e., Cairn Homes and Empire Metals go up and down completely randomly.
Pair Corralation between Cairn Homes and Empire Metals
Assuming the 90 days trading horizon Cairn Homes PLC is expected to generate 0.37 times more return on investment than Empire Metals. However, Cairn Homes PLC is 2.69 times less risky than Empire Metals. It trades about 0.27 of its potential returns per unit of risk. Empire Metals Limited is currently generating about 0.05 per unit of risk. If you would invest 17,540 in Cairn Homes PLC on September 20, 2024 and sell it today you would earn a total of 1,500 from holding Cairn Homes PLC or generate 8.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cairn Homes PLC vs. Empire Metals Limited
Performance |
| Timeline |
| Cairn Homes PLC |
| Empire Metals Limited |
Cairn Homes and Empire Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cairn Homes and Empire Metals
The main advantage of trading using opposite Cairn Homes and Empire Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairn Homes position performs unexpectedly, Empire 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 Empire Metals will offset losses from the drop in Empire Metals' long position.| Cairn Homes vs. Litigation Capital Management | Cairn Homes vs. Liontrust Asset Management | Cairn Homes vs. Panther Metals PLC | Cairn Homes vs. Jacquet Metal Service |
| Empire Metals vs. Givaudan SA | Empire Metals vs. Antofagasta PLC | Empire Metals vs. Ferrexpo PLC | Empire Metals vs. Atalaya Mining |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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