Correlation Between Cairn Homes and ACG Acquisition

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

Diversification Opportunities for Cairn Homes and ACG Acquisition

-0.82

Correlation Coefficient

Cairn Homes  ACG Acquisition

Pay attention - limited upside

The 3 months correlation between Cairn and ACG is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC and ACG Acquisition Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACG Acquisition 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 ACG Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACG Acquisition has no effect on the direction of Cairn Homes i.e., Cairn Homes and ACG Acquisition go up and down completely randomly.

Pair Corralation between Cairn Homes and ACG Acquisition

Assuming the 90 days trading horizon Cairn Homes is expected to generate 30.56 times less return on investment than ACG Acquisition. But when comparing it to its historical volatility, Cairn Homes PLC is 53.65 times less risky than ACG Acquisition. It trades about 0.15 of its potential returns per unit of risk. ACG Acquisition Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  625.00  in ACG Acquisition Co on September 14, 2024 and sell it today you would lose (115.00) from holding ACG Acquisition Co or give up 18.4% of portfolio value over 90 days.

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

Cairn Homes PLC  vs.  ACG Acquisition Co

Cairn Homes PLC

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cairn Homes PLC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Cairn Homes exhibited solid returns over the last few months and may actually be approaching a breakup point.

ACG Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ACG Acquisition Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Cairn Homes and ACG Acquisition

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

The idea behind Cairn Homes PLC and ACG Acquisition Co 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.