Correlation Between Cairn Homes and United Utilities
Can any of the company-specific risk be diversified away by investing in both Cairn Homes and United Utilities 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 United Utilities 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 United Utilities Group, you can compare the effects of market volatilities on Cairn Homes and United Utilities 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 United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairn Homes and United Utilities.
Diversification Opportunities for Cairn Homes and United Utilities
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Cairn and United is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities 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 United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of Cairn Homes i.e., Cairn Homes and United Utilities go up and down completely randomly.
Pair Corralation between Cairn Homes and United Utilities
Assuming the 90 days trading horizon Cairn Homes PLC is expected to generate 1.33 times more return on investment than United Utilities. However, Cairn Homes is 1.33 times more volatile than United Utilities Group. It trades about 0.1 of its potential returns per unit of risk. United Utilities Group is currently generating about 0.03 per unit of risk. If you would invest 7,832 in Cairn Homes PLC on September 3, 2024 and sell it today you would earn a total of 9,268 from holding Cairn Homes PLC or generate 118.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.58% |
| Values | Daily Returns |
Cairn Homes PLC vs. United Utilities Group
Performance |
| Timeline |
| Cairn Homes PLC |
| United Utilities |
Cairn Homes and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cairn Homes and United Utilities
The main advantage of trading using opposite Cairn Homes and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairn Homes position performs unexpectedly, United Utilities 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 United Utilities will offset losses from the drop in United Utilities' 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 |
| United Utilities vs. Hyundai Motor | United Utilities vs. Toyota Motor Corp | United Utilities vs. SoftBank Group Corp | United Utilities vs. Halyk Bank of |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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