Correlation Between Cairn Homes and Malin Plc

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

Diversification Opportunities for Cairn Homes and Malin Plc

0.54

Correlation Coefficient

Cairn Homes  Malin Plc

Very weak diversification

The 3 months correlation between Cairn and Malin is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and Malin plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malin plc 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 Malin Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malin plc has no effect on the direction of Cairn Homes i.e., Cairn Homes and Malin Plc go up and down completely randomly.

Pair Corralation between Cairn Homes and Malin Plc

Assuming the 90 days trading horizon Cairn Homes PLC is expected to generate 0.57 times more return on investment than Malin Plc. However, Cairn Homes PLC is 1.76 times less risky than Malin Plc. It trades about 0.07 of its potential returns per unit of risk. Malin plc is currently generating about -0.18 per unit of risk. If you would invest  160.00  in Cairn Homes PLC on February 5, 2024 and sell it today you would earn a total of  3.00  from holding Cairn Homes PLC or generate 1.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Cairn Homes PLC  vs.  Malin plc

Cairn Homes PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cairn Homes PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, Cairn Homes reported solid returns over the last few months and may actually be approaching a breakup point.

Malin plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Malin plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Malin Plc may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Cairn Homes and Malin Plc

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

The idea behind Cairn Homes PLC and Malin 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.