Correlation Between Cairn Homes and OTP Bank

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

Diversification Opportunities for Cairn Homes and OTP Bank

-0.22

Correlation Coefficient

Cairn Homes  OTP Bank

Very good diversification

The 3 months correlation between Cairn and OTP is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and OTP Bank Nyrt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OTP Bank Nyrt 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 OTP Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OTP Bank Nyrt has no effect on the direction of Cairn Homes i.e., Cairn Homes and OTP Bank go up and down completely randomly.

Pair Corralation between Cairn Homes and OTP Bank

Assuming the 90 days trading horizon Cairn Homes is expected to generate 12.11 times less return on investment than OTP Bank. But when comparing it to its historical volatility, Cairn Homes PLC is 10.39 times less risky than OTP Bank. It trades about 0.06 of its potential returns per unit of risk. OTP Bank Nyrt is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,259,000  in OTP Bank Nyrt on October 7, 2024 and sell it today you would earn a total of  0.00  from holding OTP Bank Nyrt or generate 0.0% 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.  OTP Bank Nyrt

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.

OTP Bank Nyrt

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OTP Bank Nyrt are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, OTP Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cairn Homes and OTP Bank

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

The idea behind Cairn Homes PLC and OTP Bank Nyrt 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.