Correlation Between Cairn Homes and Corre Energy

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

Diversification Opportunities for Cairn Homes and Corre Energy

0.26

Correlation Coefficient

Cairn Homes  Corre Energy

Modest diversification

The 3 months correlation between Cairn and Corre is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and Corre Energy BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corre Energy BV 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 Corre Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corre Energy BV has no effect on the direction of Cairn Homes i.e., Cairn Homes and Corre Energy go up and down completely randomly.

Pair Corralation between Cairn Homes and Corre Energy

Assuming the 90 days trading horizon Cairn Homes PLC is expected to under-perform the Corre Energy. But the stock apears to be less risky and, when comparing its historical volatility, Cairn Homes PLC is 8.37 times less risky than Corre Energy. The stock trades about -0.16 of its potential returns per unit of risk. The Corre Energy BV is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Corre Energy BV on December 30, 2024 and sell it today you would lose (2.50) from holding Corre Energy BV or give up 22.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Cairn Homes PLC  vs.  Corre Energy BV

Cairn Homes PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cairn Homes PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Corre Energy BV

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Corre Energy BV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Corre Energy demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cairn Homes and Corre Energy

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

The idea behind Cairn Homes PLC and Corre Energy BV 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.