Correlation Between Cairn Homes and Rockfire Resources
Can any of the company-specific risk be diversified away by investing in both Cairn Homes and Rockfire Resources 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 Rockfire Resources 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 Rockfire Resources plc, you can compare the effects of market volatilities on Cairn Homes and Rockfire Resources 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 Rockfire Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairn Homes and Rockfire Resources.
Diversification Opportunities for Cairn Homes and Rockfire Resources
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cairn and Rockfire is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and Rockfire Resources plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockfire Resources 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 Rockfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockfire Resources plc has no effect on the direction of Cairn Homes i.e., Cairn Homes and Rockfire Resources go up and down completely randomly.
Pair Corralation between Cairn Homes and Rockfire Resources
Assuming the 90 days trading horizon Cairn Homes PLC is expected to generate 0.35 times more return on investment than Rockfire Resources. However, Cairn Homes PLC is 2.86 times less risky than Rockfire Resources. It trades about 0.11 of its potential returns per unit of risk. Rockfire Resources plc is currently generating about 0.01 per unit of risk. If you would invest 6,785 in Cairn Homes PLC on September 3, 2024 and sell it today you would earn a total of 10,315 from holding Cairn Homes PLC or generate 152.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 91.6% |
| Values | Daily Returns |
Cairn Homes PLC vs. Rockfire Resources plc
Performance |
| Timeline |
| Cairn Homes PLC |
| Rockfire Resources plc |
Cairn Homes and Rockfire Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cairn Homes and Rockfire Resources
The main advantage of trading using opposite Cairn Homes and Rockfire Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairn Homes position performs unexpectedly, Rockfire Resources 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 Rockfire Resources will offset losses from the drop in Rockfire Resources' long position.| Cairn Homes vs. Rockfire Resources plc | Cairn Homes vs. Tlou Energy | Cairn Homes vs. Falcon Oil Gas | Cairn Homes vs. Helium One Global |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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