Correlation Between Cairn Homes and Bank of Ireland

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

Diversification Opportunities for Cairn Homes and Bank of Ireland

-0.16

Correlation Coefficient

Cairn Homes  Bank of Ireland

Good diversification

The 3 months correlation between Cairn and Bank is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and Bank of Ireland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Ireland 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 Bank of Ireland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Ireland has no effect on the direction of Cairn Homes i.e., Cairn Homes and Bank of Ireland go up and down completely randomly.

Pair Corralation between Cairn Homes and Bank of Ireland

Assuming the 90 days trading horizon Cairn Homes is expected to generate 11.74 times less return on investment than Bank of Ireland. But when comparing it to its historical volatility, Cairn Homes PLC is 1.04 times less risky than Bank of Ireland. It trades about 0.03 of its potential returns per unit of risk. Bank of Ireland is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  831.00  in Bank of Ireland on December 1, 2024 and sell it today you would earn a total of  303.00  from holding Bank of Ireland or generate 36.46% 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.  Bank of Ireland

Cairn Homes PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cairn Homes PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical indicators, Cairn Homes is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Bank of Ireland

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Ireland are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Bank of Ireland reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cairn Homes and Bank of Ireland

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

The idea behind Cairn Homes PLC and Bank of Ireland 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.