Correlation Between Nexstar Media and CAIRN HOMES

Can any of the company-specific risk be diversified away by investing in both Nexstar Media 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 Nexstar Media and CAIRN HOMES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nexstar Media Group and CAIRN HOMES EO, you can compare the effects of market volatilities on Nexstar Media 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 Nexstar Media with a short position of CAIRN HOMES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nexstar Media and CAIRN HOMES.

Diversification Opportunities for Nexstar Media and CAIRN HOMES

-0.14

Correlation Coefficient

Nexstar Media  CAIRN HOMES

Good diversification

The 3 months correlation between Nexstar and CAIRN is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Nexstar Media Group and CAIRN HOMES EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAIRN HOMES EO and Nexstar Media 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 Nexstar Media 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 EO has no effect on the direction of Nexstar Media i.e., Nexstar Media and CAIRN HOMES go up and down completely randomly.

Pair Corralation between Nexstar Media and CAIRN HOMES

Assuming the 90 days horizon Nexstar Media is expected to generate 3.21 times less return on investment than CAIRN HOMES. But when comparing it to its historical volatility, Nexstar Media Group is 1.02 times less risky than CAIRN HOMES. It trades about 0.03 of its potential returns per unit of risk. CAIRN HOMES EO is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  95.00  in CAIRN HOMES EO on December 6, 2024 and sell it today you would earn a total of  116.00  from holding CAIRN HOMES EO or generate 122.11% return on investment over 90 days.

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

Nexstar Media Group  vs.  CAIRN HOMES EO

Nexstar Media Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nexstar Media Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Nexstar Media is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

CAIRN HOMES EO

Risk-Adjusted Performance

Very Weak

Over the last 90 days CAIRN HOMES EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CAIRN HOMES is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nexstar Media and CAIRN HOMES

The main advantage of trading using opposite Nexstar Media and CAIRN HOMES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nexstar Media 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's long position.

The idea behind Nexstar Media Group and CAIRN HOMES EO 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.