Correlation Between Barratt Developments and Pan Pacific

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

Diversification Opportunities for Barratt Developments and Pan Pacific

-0.27

Correlation Coefficient

Barratt Developments  Pan Pacific

Very good diversification

The 3 months correlation between Barratt and Pan is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Barratt Developments plc and Pan Pacific International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan Pacific International 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 Pan Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan Pacific International has no effect on the direction of Barratt Developments i.e., Barratt Developments and Pan Pacific go up and down completely randomly.

Pair Corralation between Barratt Developments and Pan Pacific

Assuming the 90 days horizon Barratt Developments is expected to generate 3.15 times less return on investment than Pan Pacific. In addition to that, Barratt Developments is 1.39 times more volatile than Pan Pacific International. It trades about 0.02 of its total potential returns per unit of risk. Pan Pacific International is currently generating about 0.07 per unit of volatility. If you would invest  1,822  in Pan Pacific International on September 30, 2024 and sell it today you would earn a total of  941.00  from holding Pan Pacific International or generate 51.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	64.61%
Values	Daily Returns

Barratt Developments plc  vs.  Pan Pacific International

Barratt Developments plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Barratt Developments plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pan Pacific International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Pacific International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Pan Pacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Barratt Developments and Pan Pacific

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

The idea behind Barratt Developments plc and Pan Pacific International 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.