Correlation Between CAIRN HOMES and Corporate Office

Can any of the company-specific risk be diversified away by investing in both CAIRN HOMES and Corporate Office 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 Corporate Office 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 Corporate Office Properties, you can compare the effects of market volatilities on CAIRN HOMES and Corporate Office 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 Corporate Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAIRN HOMES and Corporate Office.

Diversification Opportunities for CAIRN HOMES and Corporate Office

0.62

Correlation Coefficient

CAIRN HOMES  Corporate Office

Poor diversification

The 3 months correlation between CAIRN and Corporate is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding CAIRN HOMES EO and Corporate Office Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporate Office Pro 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 Corporate Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporate Office Pro has no effect on the direction of CAIRN HOMES i.e., CAIRN HOMES and Corporate Office go up and down completely randomly.

Pair Corralation between CAIRN HOMES and Corporate Office

Assuming the 90 days horizon CAIRN HOMES EO is expected to generate 1.62 times more return on investment than Corporate Office. However, CAIRN HOMES is 1.62 times more volatile than Corporate Office Properties. It trades about -0.06 of its potential returns per unit of risk. Corporate Office Properties is currently generating about -0.21 per unit of risk. If you would invest  238.00  in CAIRN HOMES EO on December 21, 2024 and sell it today you would lose (23.00) from holding CAIRN HOMES EO or give up 9.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

CAIRN HOMES EO  vs.  Corporate Office Properties

CAIRN HOMES EO

Risk-Adjusted Performance

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Corporate Office Pro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Corporate Office Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with CAIRN HOMES and Corporate Office

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

The idea behind CAIRN HOMES EO and Corporate Office Properties 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.