Correlation Between SANTANDER and Cairn Homes
Can any of the company-specific risk be diversified away by investing in both SANTANDER 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 SANTANDER and Cairn Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SANTANDER UK 8 and Cairn Homes PLC, you can compare the effects of market volatilities on SANTANDER 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 SANTANDER with a short position of Cairn Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of SANTANDER and Cairn Homes.
Diversification Opportunities for SANTANDER and Cairn Homes
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between SANTANDER and Cairn is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding SANTANDER UK 8 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 SANTANDER 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 SANTANDER UK 8 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 SANTANDER i.e., SANTANDER and Cairn Homes go up and down completely randomly.
Pair Corralation between SANTANDER and Cairn Homes
Assuming the 90 days trading horizon SANTANDER is expected to generate 11.83 times less return on investment than Cairn Homes. But when comparing it to its historical volatility, SANTANDER UK 8 is 7.78 times less risky than Cairn Homes. It trades about 0.17 of its potential returns per unit of risk. Cairn Homes PLC is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 17,380 in Cairn Homes PLC on September 26, 2024 and sell it today you would earn a total of 1,540 from holding Cairn Homes PLC or generate 8.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SANTANDER UK 8 vs. Cairn Homes PLC
Performance |
| Timeline |
| SANTANDER UK 8 |
| Cairn Homes PLC |
SANTANDER and Cairn Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SANTANDER and Cairn Homes
The main advantage of trading using opposite SANTANDER and Cairn Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SANTANDER 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.| SANTANDER vs. CVR Energy | SANTANDER vs. Viridian Therapeutics | SANTANDER vs. Nationwide Building Society | SANTANDER vs. Digital Realty Trust |
| Cairn Homes vs. SupplyMe Capital PLC | Cairn Homes vs. Lloyds Banking Group | Cairn Homes vs. Premier African Minerals | Cairn Homes vs. SANTANDER UK 8 |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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