Correlation Between CAIRN HOMES and CSL

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

Diversification Opportunities for CAIRN HOMES and CSL

0.18

Correlation Coefficient

CAIRN HOMES  CSL

Average diversification

The 3 months correlation between CAIRN and CSL is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding CAIRN HOMES EO and CSL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL Limited 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 CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL Limited has no effect on the direction of CAIRN HOMES i.e., CAIRN HOMES and CSL go up and down completely randomly.

Pair Corralation between CAIRN HOMES and CSL

Assuming the 90 days horizon CAIRN HOMES EO is expected to generate 1.77 times more return on investment than CSL. However, CAIRN HOMES is 1.77 times more volatile than CSL Limited. It trades about -0.04 of its potential returns per unit of risk. CSL Limited is currently generating about -0.11 per unit of risk. If you would invest  216.00  in CAIRN HOMES EO on April 8, 2025 and sell it today you would lose (5.00) from holding CAIRN HOMES EO or give up 2.31% of portfolio value over 90 days.

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

CAIRN HOMES EO  vs.  CSL Limited

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 8 (%) 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.

CSL Limited

Risk-Adjusted Performance

Weak

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

Pair Trading with CAIRN HOMES and CSL

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

The idea behind CAIRN HOMES EO and CSL Limited 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.