Correlation Between Centaur Media and Cairn Homes

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

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

Diversification Opportunities for Centaur Media and Cairn Homes

-0.6

Correlation Coefficient

Centaur Media  Cairn Homes

Excellent diversification

The 3 months correlation between Centaur and Cairn is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Centaur Media 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 Centaur Media 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 Centaur Media 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 Centaur Media i.e., Centaur Media and Cairn Homes go up and down completely randomly.

Pair Corralation between Centaur Media and Cairn Homes

Assuming the 90 days trading horizon Centaur Media is expected to generate 1.84 times less return on investment than Cairn Homes. But when comparing it to its historical volatility, Centaur Media is 1.32 times less risky than Cairn Homes. It trades about 0.21 of its potential returns per unit of risk. Cairn Homes PLC is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  17,840  in Cairn Homes PLC on October 4, 2024 and sell it today you would earn a total of  1,520  from holding Cairn Homes PLC or generate 8.52% return on investment over 90 days.

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

Centaur Media  vs.  Cairn Homes PLC

Centaur Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centaur Media has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Cairn Homes PLC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cairn Homes PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Cairn Homes exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Centaur Media and Cairn Homes

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

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.