Correlation Between FD Technologies and Cairn Homes

Can any of the company-specific risk be diversified away by investing in both FD Technologies 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 FD Technologies and Cairn Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FD Technologies PLC and Cairn Homes PLC, you can compare the effects of market volatilities on FD Technologies 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 FD Technologies with a short position of Cairn Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of FD Technologies and Cairn Homes.

Diversification Opportunities for FD Technologies and Cairn Homes

0.49

Correlation Coefficient

FD Technologies  Cairn Homes

Very weak diversification

The 3 months correlation between GYQ and Cairn is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding FD Technologies PLC 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 FD Technologies 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 FD Technologies PLC 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 FD Technologies i.e., FD Technologies and Cairn Homes go up and down completely randomly.

Pair Corralation between FD Technologies and Cairn Homes

Assuming the 90 days trading horizon FD Technologies is expected to generate 3.03 times less return on investment than Cairn Homes. In addition to that, FD Technologies is 1.58 times more volatile than Cairn Homes PLC. It trades about 0.03 of its total potential returns per unit of risk. Cairn Homes PLC is currently generating about 0.15 per unit of volatility. If you would invest  124.00  in Cairn Homes PLC on September 23, 2024 and sell it today you would earn a total of  111.00  from holding Cairn Homes PLC or generate 89.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.63%
Values	Daily Returns

FD Technologies PLC  vs.  Cairn Homes PLC

FD Technologies PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FD Technologies PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, FD Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Cairn Homes PLC

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cairn Homes PLC are ranked lower than 15 (%) 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.

Pair Trading with FD Technologies and Cairn Homes

The main advantage of trading using opposite FD Technologies and Cairn Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FD Technologies 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.

The idea behind FD Technologies PLC and Cairn Homes PLC 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.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.