Correlation Between Cairn Homes and Smithson Investment
Can any of the company-specific risk be diversified away by investing in both Cairn Homes and Smithson Investment 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 Smithson Investment 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 Smithson Investment Trust, you can compare the effects of market volatilities on Cairn Homes and Smithson Investment 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 Smithson Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairn Homes and Smithson Investment.
Diversification Opportunities for Cairn Homes and Smithson Investment
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cairn and Smithson is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and Smithson Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smithson Investment Trust 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 Smithson Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smithson Investment Trust has no effect on the direction of Cairn Homes i.e., Cairn Homes and Smithson Investment go up and down completely randomly.
Pair Corralation between Cairn Homes and Smithson Investment
Assuming the 90 days trading horizon Cairn Homes PLC is expected to under-perform the Smithson Investment. In addition to that, Cairn Homes is 2.01 times more volatile than Smithson Investment Trust. It trades about -0.01 of its total potential returns per unit of risk. Smithson Investment Trust is currently generating about 0.1 per unit of volatility. If you would invest 151,600 in Smithson Investment Trust on November 28, 2024 and sell it today you would earn a total of 2,400 from holding Smithson Investment Trust or generate 1.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cairn Homes PLC vs. Smithson Investment Trust
Performance |
| Timeline |
| Cairn Homes PLC |
| Smithson Investment Trust |
Cairn Homes and Smithson Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cairn Homes and Smithson Investment
The main advantage of trading using opposite Cairn Homes and Smithson Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairn Homes position performs unexpectedly, Smithson Investment 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 Smithson Investment will offset losses from the drop in Smithson Investment's long position.| Cairn Homes vs. Elmos Semiconductor SE | Cairn Homes vs. Wizz Air Holdings | Cairn Homes vs. Vietnam Enterprise Investments | Cairn Homes vs. Mobius Investment Trust |
| Smithson Investment vs. Optima Health plc | Smithson Investment vs. Tatton Asset Management | Smithson Investment vs. Target Healthcare REIT | Smithson Investment vs. PureTech Health plc |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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