Correlation Between Cairn Homes and Batm Advanced

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

Diversification Opportunities for Cairn Homes and Batm Advanced

0.66

Correlation Coefficient

Cairn Homes  Batm Advanced

Poor diversification

The 3 months correlation between Cairn and Batm is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and Batm Advanced Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Batm Advanced Commun 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 Batm Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Batm Advanced Commun has no effect on the direction of Cairn Homes i.e., Cairn Homes and Batm Advanced go up and down completely randomly.

Pair Corralation between Cairn Homes and Batm Advanced

Assuming the 90 days trading horizon Cairn Homes PLC is expected to generate 0.72 times more return on investment than Batm Advanced. However, Cairn Homes PLC is 1.39 times less risky than Batm Advanced. It trades about -0.09 of its potential returns per unit of risk. Batm Advanced Communications is currently generating about -0.19 per unit of risk. If you would invest  19,280  in Cairn Homes PLC on December 22, 2024 and sell it today you would lose (1,840) from holding Cairn Homes PLC or give up 9.54% of portfolio value over 90 days.

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

Cairn Homes PLC  vs.  Batm Advanced Communications

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. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Batm Advanced Commun

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Cairn Homes and Batm Advanced

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

The idea behind Cairn Homes PLC and Batm Advanced Communications 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.