Correlation Between Donegal Investment and Cairn Homes

Can any of the company-specific risk be diversified away by investing in both Donegal Investment and Cairn Homes 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 Donegal Investment and Cairn Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Donegal Investment Group and Cairn Homes PLC, you can compare the effects of market volatilities on Donegal Investment and Cairn Homes 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 Donegal Investment with a short position of Cairn Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Donegal Investment and Cairn Homes.

Diversification Opportunities for Donegal Investment and Cairn Homes

0.3

Correlation Coefficient

Donegal Investment  Cairn Homes

Weak diversification

The 3 months correlation between Donegal and Cairn is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Donegal Investment Group and Cairn Homes PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cairn Homes PLC and Donegal Investment 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 Donegal Investment Group are associated (or correlated) with Cairn Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cairn Homes PLC has no effect on the direction of Donegal Investment i.e., Donegal Investment and Cairn Homes go up and down completely randomly.

Pair Corralation between Donegal Investment and Cairn Homes

Assuming the 90 days trading horizon Donegal Investment Group is expected to generate 74.61 times more return on investment than Cairn Homes. However, Donegal Investment is 74.61 times more volatile than Cairn Homes PLC. It trades about 0.11 of its potential returns per unit of risk. Cairn Homes PLC is currently generating about -0.08 per unit of risk. If you would invest  1,660  in Donegal Investment Group on December 21, 2024 and sell it today you would lose (10.00) from holding Donegal Investment Group or give up 0.6% of portfolio value over 90 days.

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

Donegal Investment Group  vs.  Cairn Homes PLC

Donegal Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Donegal Investment Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Donegal Investment reported solid returns over the last few months and may actually be approaching a breakup point.

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. Even with latest weak performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Donegal Investment and Cairn Homes

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

The idea behind Donegal Investment Group and Cairn Homes PLC 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.