Correlation Between Cairn Homes and Virgin Wines

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

Diversification Opportunities for Cairn Homes and Virgin Wines

-0.79

Correlation Coefficient

Cairn Homes  Virgin Wines

Pay attention - limited upside

The 3 months correlation between Cairn and Virgin is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and Virgin Wines UK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Wines UK 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 Virgin Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Wines UK has no effect on the direction of Cairn Homes i.e., Cairn Homes and Virgin Wines go up and down completely randomly.

Pair Corralation between Cairn Homes and Virgin Wines

Assuming the 90 days trading horizon Cairn Homes PLC is expected to generate 0.83 times more return on investment than Virgin Wines. However, Cairn Homes PLC is 1.2 times less risky than Virgin Wines. It trades about 0.15 of its potential returns per unit of risk. Virgin Wines UK is currently generating about -0.07 per unit of risk. If you would invest  18,160  in Cairn Homes PLC on October 10, 2024 and sell it today you would earn a total of  840.00  from holding Cairn Homes PLC or generate 4.63% return on investment over 90 days.

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

Cairn Homes PLC  vs.  Virgin Wines UK

Cairn Homes PLC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cairn Homes PLC are ranked lower than 9 (%) 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.

Virgin Wines UK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virgin Wines UK 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 basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Cairn Homes and Virgin Wines

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

The idea behind Cairn Homes PLC and Virgin Wines UK 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.