Correlation Between Cairn Homes and Bertrandt

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

Diversification Opportunities for Cairn Homes and Bertrandt

-0.26

Correlation Coefficient

Cairn Homes  Bertrandt

Very good diversification

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

Pair Corralation between Cairn Homes and Bertrandt

Assuming the 90 days trading horizon Cairn Homes PLC is expected to generate 0.55 times more return on investment than Bertrandt. However, Cairn Homes PLC is 1.83 times less risky than Bertrandt. It trades about 0.11 of its potential returns per unit of risk. Bertrandt AG is currently generating about -0.07 per unit of risk. If you would invest  17,120  in Cairn Homes PLC on October 12, 2024 and sell it today you would earn a total of  1,720  from holding Cairn Homes PLC or generate 10.05% 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.  Bertrandt AG

Cairn Homes PLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cairn Homes PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Cairn Homes may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Bertrandt AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bertrandt AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Cairn Homes and Bertrandt

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

The idea behind Cairn Homes PLC and Bertrandt AG 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.