Correlation Between Cairn Homes and Donegal Investment

Can any of the company-specific risk be diversified away by investing in both Cairn Homes and Donegal 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 Donegal 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 Donegal Investment Group, you can compare the effects of market volatilities on Cairn Homes and Donegal 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 Donegal Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cairn Homes and Donegal Investment.

Diversification Opportunities for Cairn Homes and Donegal Investment

0.08

Correlation Coefficient

Cairn Homes  Donegal Investment

Significant diversification

The 3 months correlation between Cairn and Donegal is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and Donegal Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Donegal Investment 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 Donegal Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Donegal Investment has no effect on the direction of Cairn Homes i.e., Cairn Homes and Donegal Investment go up and down completely randomly.

Pair Corralation between Cairn Homes and Donegal Investment

Assuming the 90 days trading horizon Cairn Homes PLC is expected to generate 7.39 times more return on investment than Donegal Investment. However, Cairn Homes is 7.39 times more volatile than Donegal Investment Group. It trades about 0.22 of its potential returns per unit of risk. Donegal Investment Group is currently generating about 0.04 per unit of risk. If you would invest  186.00  in Cairn Homes PLC on September 17, 2024 and sell it today you would earn a total of  47.00  from holding Cairn Homes PLC or generate 25.27% 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.  Donegal Investment Group

Cairn Homes PLC

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cairn Homes PLC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, Cairn Homes reported solid returns over the last few months and may actually be approaching a breakup point.

Donegal Investment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Donegal Investment Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Donegal Investment is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Cairn Homes and Donegal Investment

The main advantage of trading using opposite Cairn Homes and Donegal Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairn Homes position performs unexpectedly, Donegal 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 Donegal Investment will offset losses from the drop in Donegal Investment's long position.

The idea behind Cairn Homes PLC and Donegal Investment Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .