Correlation Between Cairn Homes and Halfords Group
Can any of the company-specific risk be diversified away by investing in both Cairn Homes and Halfords Group 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 Halfords Group 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 Halfords Group PLC, you can compare the effects of market volatilities on Cairn Homes and Halfords Group 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 Halfords Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairn Homes and Halfords Group.
Diversification Opportunities for Cairn Homes and Halfords Group
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Cairn and Halfords is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and Halfords Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halfords Group PLC 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 Halfords Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halfords Group PLC has no effect on the direction of Cairn Homes i.e., Cairn Homes and Halfords Group go up and down completely randomly.
Pair Corralation between Cairn Homes and Halfords Group
Assuming the 90 days trading horizon Cairn Homes PLC is expected to generate 0.55 times more return on investment than Halfords Group. However, Cairn Homes PLC is 1.82 times less risky than Halfords Group. It trades about 0.12 of its potential returns per unit of risk. Halfords Group PLC is currently generating about 0.0 per unit of risk. If you would invest 8,956 in Cairn Homes PLC on September 2, 2024 and sell it today you would earn a total of 8,144 from holding Cairn Homes PLC or generate 90.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cairn Homes PLC vs. Halfords Group PLC
Performance |
| Timeline |
| Cairn Homes PLC |
| Halfords Group PLC |
Cairn Homes and Halfords Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cairn Homes and Halfords Group
The main advantage of trading using opposite Cairn Homes and Halfords Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairn Homes position performs unexpectedly, Halfords Group 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 Halfords Group will offset losses from the drop in Halfords Group's long position.| Cairn Homes vs. Rightmove PLC | Cairn Homes vs. Bioventix | Cairn Homes vs. VeriSign | Cairn Homes vs. Games Workshop Group |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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