Correlation Between River and Cairn Homes
Can any of the company-specific risk be diversified away by investing in both River and Cairn Homes 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 River and Cairn Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between River and Mercantile and Cairn Homes PLC, you can compare the effects of market volatilities on River and Cairn Homes 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 River with a short position of Cairn Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of River and Cairn Homes.
Diversification Opportunities for River and Cairn Homes
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between River and Cairn is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding River and Mercantile and Cairn Homes PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cairn Homes PLC and River 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 River and Mercantile are associated (or correlated) with Cairn Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cairn Homes PLC has no effect on the direction of River i.e., River and Cairn Homes go up and down completely randomly.
Pair Corralation between River and Cairn Homes
Assuming the 90 days trading horizon River is expected to generate 8.45 times less return on investment than Cairn Homes. But when comparing it to its historical volatility, River and Mercantile is 1.6 times less risky than Cairn Homes. It trades about 0.02 of its potential returns per unit of risk. Cairn Homes PLC is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 7,071 in Cairn Homes PLC on September 14, 2024 and sell it today you would earn a total of 12,369 from holding Cairn Homes PLC or generate 174.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
River and Mercantile vs. Cairn Homes PLC
Performance |
| Timeline |
| River and Mercantile |
| Cairn Homes PLC |
River and Cairn Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with River and Cairn Homes
The main advantage of trading using opposite River and Cairn Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if River position performs unexpectedly, Cairn Homes 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 Cairn Homes will offset losses from the drop in Cairn Homes' long position.| River vs. Delta Air Lines | River vs. Fair Oaks Income | River vs. Wizz Air Holdings | River vs. Zoom Video Communications |
| Cairn Homes vs. Home Depot | Cairn Homes vs. Weiss Korea Opportunity | Cairn Homes vs. River and Mercantile | Cairn Homes vs. Chrysalis Investments |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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