Correlation Between Persimmon PLC and Lennar
Can any of the company-specific risk be diversified away by investing in both Persimmon PLC and Lennar 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 Persimmon PLC and Lennar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Persimmon PLC and Lennar, you can compare the effects of market volatilities on Persimmon PLC and Lennar 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 Persimmon PLC with a short position of Lennar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Persimmon PLC and Lennar.
Diversification Opportunities for Persimmon PLC and Lennar
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Persimmon and Lennar is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Persimmon PLC and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar and Persimmon PLC 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 Persimmon PLC are associated (or correlated) with Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of Persimmon PLC i.e., Persimmon PLC and Lennar go up and down completely randomly.
Pair Corralation between Persimmon PLC and Lennar
Assuming the 90 days horizon Persimmon PLC is expected to generate 5.47 times less return on investment than Lennar. In addition to that, Persimmon PLC is 2.03 times more volatile than Lennar. It trades about 0.01 of its total potential returns per unit of risk. Lennar is currently generating about 0.07 per unit of volatility. If you would invest 11,122 in Lennar on August 31, 2024 and sell it today you would earn a total of 6,317 from holding Lennar or generate 56.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 80.75% |
| Values | Daily Returns |
Persimmon PLC vs. Lennar
Performance |
| Timeline |
| Persimmon PLC |
| Lennar |
Persimmon PLC and Lennar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Persimmon PLC and Lennar
The main advantage of trading using opposite Persimmon PLC and Lennar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Persimmon PLC position performs unexpectedly, Lennar 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 Lennar will offset losses from the drop in Lennar's long position.| Persimmon PLC vs. Taylor Wimpey plc | Persimmon PLC vs. Consorcio ARA S | Persimmon PLC vs. Barratt Developments PLC | Persimmon PLC vs. Cyrela Brazil Realty |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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