Correlation Between Cyrela Brazil and Persimmon Plc

Can any of the company-specific risk be diversified away by investing in both Cyrela Brazil 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 Cyrela Brazil and Persimmon Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cyrela Brazil Realty and Persimmon Plc, you can compare the effects of market volatilities on Cyrela Brazil 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 Cyrela Brazil with a short position of Persimmon Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cyrela Brazil and Persimmon Plc.

Diversification Opportunities for Cyrela Brazil and Persimmon Plc

0.59

Correlation Coefficient

Cyrela Brazil  Persimmon Plc

Very weak diversification

The 3 months correlation between Cyrela and Persimmon is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Cyrela Brazil Realty and Persimmon Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Persimmon Plc and Cyrela Brazil 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 Cyrela Brazil Realty 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 Cyrela Brazil i.e., Cyrela Brazil and Persimmon Plc go up and down completely randomly.

Pair Corralation between Cyrela Brazil and Persimmon Plc

Assuming the 90 days horizon Cyrela Brazil Realty is expected to generate 1.5 times more return on investment than Persimmon Plc. However, Cyrela Brazil is 1.5 times more volatile than Persimmon Plc. It trades about -0.03 of its potential returns per unit of risk. Persimmon Plc is currently generating about -0.09 per unit of risk. If you would invest  343.00  in Cyrela Brazil Realty on September 5, 2024 and sell it today you would lose (42.00) from holding Cyrela Brazil Realty or give up 12.24% of portfolio value over 90 days.

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

Cyrela Brazil Realty  vs.  Persimmon Plc

Cyrela Brazil Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cyrela Brazil Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Persimmon Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Persimmon Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Cyrela Brazil and Persimmon Plc

The main advantage of trading using opposite Cyrela Brazil and Persimmon Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cyrela Brazil 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.

The idea behind Cyrela Brazil Realty and Persimmon Plc 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.