Correlation Between CAIRN HOMES and LEONS FURNITURE

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

By analyzing existing cross correlation between CAIRN HOMES EO and LEONS FURNITURE, you can compare the effects of market volatilities on CAIRN HOMES and LEONS FURNITURE 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 LEONS FURNITURE. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAIRN HOMES and LEONS FURNITURE.

Diversification Opportunities for CAIRN HOMES and LEONS FURNITURE

0.92

Correlation Coefficient

CAIRN HOMES  LEONS FURNITURE

Almost no diversification

The 3 months correlation between CAIRN and LEONS is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding CAIRN HOMES EO and LEONS FURNITURE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEONS FURNITURE 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 EO are associated (or correlated) with LEONS FURNITURE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEONS FURNITURE has no effect on the direction of CAIRN HOMES i.e., CAIRN HOMES and LEONS FURNITURE go up and down completely randomly.

Pair Corralation between CAIRN HOMES and LEONS FURNITURE

Assuming the 90 days horizon CAIRN HOMES is expected to generate 1.22 times less return on investment than LEONS FURNITURE. In addition to that, CAIRN HOMES is 1.15 times more volatile than LEONS FURNITURE. It trades about 0.14 of its total potential returns per unit of risk. LEONS FURNITURE is currently generating about 0.19 per unit of volatility. If you would invest  1,390  in LEONS FURNITURE on April 17, 2025 and sell it today you would earn a total of  330.00  from holding LEONS FURNITURE or generate 23.74% return on investment over 90 days.

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

CAIRN HOMES EO  vs.  LEONS FURNITURE

CAIRN HOMES EO

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CAIRN HOMES EO are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CAIRN HOMES reported solid returns over the last few months and may actually be approaching a breakup point.

LEONS FURNITURE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LEONS FURNITURE are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, LEONS FURNITURE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CAIRN HOMES and LEONS FURNITURE

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

The idea behind CAIRN HOMES EO and LEONS FURNITURE 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.