Correlation Between Cairn Homes and TR Property

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

Diversification Opportunities for Cairn Homes and TR Property

-0.67

Correlation Coefficient

Cairn Homes  TR Property

Excellent diversification

The 3 months correlation between Cairn and TRY is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and TR Property Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TR Property Investment 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 TR Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TR Property Investment has no effect on the direction of Cairn Homes i.e., Cairn Homes and TR Property go up and down completely randomly.

Pair Corralation between Cairn Homes and TR Property

Assuming the 90 days trading horizon Cairn Homes PLC is expected to generate 1.79 times more return on investment than TR Property. However, Cairn Homes is 1.79 times more volatile than TR Property Investment. It trades about 0.09 of its potential returns per unit of risk. TR Property Investment is currently generating about -0.1 per unit of risk. If you would invest  15,959  in Cairn Homes PLC on September 4, 2024 and sell it today you would earn a total of  1,581  from holding Cairn Homes PLC or generate 9.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Cairn Homes PLC  vs.  TR Property Investment

Cairn Homes PLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cairn Homes PLC are ranked lower than 6 (%) 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 January 2025.

TR Property Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TR Property Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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.

Pair Trading with Cairn Homes and TR Property

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

The idea behind Cairn Homes PLC and TR Property Investment 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.