Correlation Between Barratt Developments and Persimmon Plc
Can any of the company-specific risk be diversified away by investing in both Barratt Developments and Persimmon 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 Barratt Developments and Persimmon Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barratt Developments PLC and Persimmon Plc, you can compare the effects of market volatilities on Barratt Developments and Persimmon 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 Barratt Developments with a short position of Persimmon Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barratt Developments and Persimmon Plc.
Diversification Opportunities for Barratt Developments and Persimmon Plc
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Barratt and Persimmon is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Barratt Developments PLC and Persimmon Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Persimmon Plc and Barratt Developments 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 Barratt Developments PLC are associated (or correlated) with Persimmon Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Persimmon Plc has no effect on the direction of Barratt Developments i.e., Barratt Developments and Persimmon Plc go up and down completely randomly.
Pair Corralation between Barratt Developments and Persimmon Plc
Assuming the 90 days horizon Barratt Developments PLC is expected to generate 0.66 times more return on investment than Persimmon Plc. However, Barratt Developments PLC is 1.52 times less risky than Persimmon Plc. It trades about -0.5 of its potential returns per unit of risk. Persimmon Plc is currently generating about -0.42 per unit of risk. If you would invest 1,243 in Barratt Developments PLC on August 25, 2024 and sell it today you would lose (225.00) from holding Barratt Developments PLC or give up 18.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barratt Developments PLC vs. Persimmon Plc
Performance |
| Timeline |
| Barratt Developments PLC |
| Persimmon Plc |
Barratt Developments and Persimmon Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barratt Developments and Persimmon Plc
The main advantage of trading using opposite Barratt Developments and Persimmon Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barratt Developments position performs unexpectedly, Persimmon 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 Persimmon Plc will offset losses from the drop in Persimmon Plc's long position.| Barratt Developments vs. Greystone Logistics | Barratt Developments vs. Mill City Ventures | Barratt Developments vs. Barksdale Resources Corp | Barratt Developments vs. Black Diamond Group |
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Check out your portfolio center.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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