Correlation Between CAIRN HOMES and ELECOM

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

By analyzing existing cross correlation between CAIRN HOMES EO and ELECOM LTD, you can compare the effects of market volatilities on CAIRN HOMES and ELECOM 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 ELECOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAIRN HOMES and ELECOM.

Diversification Opportunities for CAIRN HOMES and ELECOM

0.24

Correlation Coefficient

CAIRN HOMES  ELECOM

Modest diversification

The 3 months correlation between CAIRN and ELECOM is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding CAIRN HOMES EO and ELECOM LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ELECOM LTD 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 EO are associated (or correlated) with ELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ELECOM LTD has no effect on the direction of CAIRN HOMES i.e., CAIRN HOMES and ELECOM go up and down completely randomly.

Pair Corralation between CAIRN HOMES and ELECOM

Assuming the 90 days horizon CAIRN HOMES EO is expected to under-perform the ELECOM. In addition to that, CAIRN HOMES is 2.28 times more volatile than ELECOM LTD. It trades about 0.0 of its total potential returns per unit of risk. ELECOM LTD is currently generating about 0.07 per unit of volatility. If you would invest  840.00  in ELECOM LTD on October 25, 2024 and sell it today you would earn a total of  35.00  from holding ELECOM LTD or generate 4.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

CAIRN HOMES EO  vs.  ELECOM LTD

CAIRN HOMES EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CAIRN HOMES EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CAIRN HOMES is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

ELECOM LTD

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ELECOM LTD are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ELECOM is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CAIRN HOMES and ELECOM

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

The idea behind CAIRN HOMES EO and ELECOM LTD 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.