Correlation Between Cairn Homes and Molson Coors

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

Diversification Opportunities for Cairn Homes and Molson Coors

0.04

Correlation Coefficient

Cairn Homes  Molson Coors

Significant diversification

The 3 months correlation between Cairn and Molson is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and Molson Coors Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molson Coors Beverage 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 Molson Coors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molson Coors Beverage has no effect on the direction of Cairn Homes i.e., Cairn Homes and Molson Coors go up and down completely randomly.

Pair Corralation between Cairn Homes and Molson Coors

Assuming the 90 days trading horizon Cairn Homes PLC is expected to generate 1.19 times more return on investment than Molson Coors. However, Cairn Homes is 1.19 times more volatile than Molson Coors Beverage. It trades about 0.13 of its potential returns per unit of risk. Molson Coors Beverage is currently generating about 0.03 per unit of risk. If you would invest  16,960  in Cairn Homes PLC on October 7, 2024 and sell it today you would earn a total of  2,200  from holding Cairn Homes PLC or generate 12.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Cairn Homes PLC  vs.  Molson Coors Beverage

Cairn Homes PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cairn Homes PLC are ranked lower than 10 (%) 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.

Molson Coors Beverage

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Beverage are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Molson Coors is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cairn Homes and Molson Coors

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

The idea behind Cairn Homes PLC and Molson Coors Beverage 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.