Correlation Between Cairn Homes and Irish Continental

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

Diversification Opportunities for Cairn Homes and Irish Continental

-0.3

Correlation Coefficient

Cairn Homes  Irish Continental

Very good diversification

The 3 months correlation between Cairn and Irish is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and Irish Continental Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Irish Continental 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 Irish Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Irish Continental has no effect on the direction of Cairn Homes i.e., Cairn Homes and Irish Continental go up and down completely randomly.

Pair Corralation between Cairn Homes and Irish Continental

Assuming the 90 days trading horizon Cairn Homes PLC is expected to generate 1.09 times more return on investment than Irish Continental. However, Cairn Homes is 1.09 times more volatile than Irish Continental Group. It trades about 0.22 of its potential returns per unit of risk. Irish Continental Group is currently generating about 0.0 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cairn Homes PLC  vs.  Irish Continental 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.

Irish Continental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Irish Continental Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Irish Continental 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 Irish Continental

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

The idea behind Cairn Homes PLC and Irish Continental 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.