Correlation Between Cairn Homes and Ecclesiastical Insurance

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

Diversification Opportunities for Cairn Homes and Ecclesiastical Insurance

0.21

Correlation Coefficient

Cairn Homes  Ecclesiastical Insurance

Modest diversification

The 3 months correlation between Cairn and Ecclesiastical is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and Ecclesiastical Insurance Offic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecclesiastical Insurance 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 Ecclesiastical Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecclesiastical Insurance has no effect on the direction of Cairn Homes i.e., Cairn Homes and Ecclesiastical Insurance go up and down completely randomly.

Pair Corralation between Cairn Homes and Ecclesiastical Insurance

Assuming the 90 days trading horizon Cairn Homes PLC is expected to generate 1.82 times more return on investment than Ecclesiastical Insurance. However, Cairn Homes is 1.82 times more volatile than Ecclesiastical Insurance Office. It trades about 0.14 of its potential returns per unit of risk. Ecclesiastical Insurance Office is currently generating about 0.07 per unit of risk. If you would invest  8,882  in Cairn Homes PLC on October 4, 2024 and sell it today you would earn a total of  10,478  from holding Cairn Homes PLC or generate 117.97% return on investment over 90 days.

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

Cairn Homes PLC  vs.  Ecclesiastical Insurance Offic

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.

Ecclesiastical Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecclesiastical Insurance Office has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ecclesiastical Insurance 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 Ecclesiastical Insurance

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

The idea behind Cairn Homes PLC and Ecclesiastical Insurance Office 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.