Correlation Between Hansa Investment and Cairn Homes

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

Diversification Opportunities for Hansa Investment and Cairn Homes

0.28

Correlation Coefficient

Hansa Investment  Cairn Homes

Modest diversification

The 3 months correlation between Hansa and Cairn is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Hansa Investment 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 Hansa 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 Hansa Investment 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 Hansa Investment i.e., Hansa Investment and Cairn Homes go up and down completely randomly.

Pair Corralation between Hansa Investment and Cairn Homes

Assuming the 90 days trading horizon Hansa Investment is expected to generate 5.34 times less return on investment than Cairn Homes. But when comparing it to its historical volatility, Hansa Investment is 1.06 times less risky than Cairn Homes. It trades about 0.02 of its potential returns per unit of risk. Cairn Homes PLC is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  17,540  in Cairn Homes PLC on November 20, 2024 and sell it today you would earn a total of  1,260  from holding Cairn Homes PLC or generate 7.18% return on investment over 90 days.

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

Hansa Investment  vs.  Cairn Homes PLC

Hansa Investment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hansa Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Hansa Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Cairn Homes PLC

Risk-Adjusted Performance

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 March 2025.

Pair Trading with Hansa Investment and Cairn Homes

The main advantage of trading using opposite Hansa Investment and Cairn Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hansa 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 Hansa Investment 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.