Correlation Between Persimmon PLC and Consorcio ARA

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

By analyzing existing cross correlation between Persimmon PLC and Consorcio ARA S, you can compare the effects of market volatilities on Persimmon PLC and Consorcio ARA 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 Consorcio ARA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Persimmon PLC and Consorcio ARA.

Diversification Opportunities for Persimmon PLC and Consorcio ARA

0.17

Correlation Coefficient

Persimmon PLC  Consorcio ARA

Average diversification

The 3 months correlation between Persimmon and Consorcio is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Persimmon PLC and Consorcio ARA S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consorcio ARA S 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 Consorcio ARA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consorcio ARA S has no effect on the direction of Persimmon PLC i.e., Persimmon PLC and Consorcio ARA go up and down completely randomly.

Pair Corralation between Persimmon PLC and Consorcio ARA

Assuming the 90 days horizon Persimmon PLC is expected to under-perform the Consorcio ARA. But the pink sheet apears to be less risky and, when comparing its historical volatility, Persimmon PLC is 2.9 times less risky than Consorcio ARA. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Consorcio ARA S is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Consorcio ARA S on September 13, 2024 and sell it today you would lose (6.00) from holding Consorcio ARA S or give up 35.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Persimmon PLC  vs.  Consorcio ARA S

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. Despite inconsistent performance in the last few months, the Stock's primary 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.

Consorcio ARA S

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consorcio ARA S has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Persimmon PLC and Consorcio ARA

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

The idea behind Persimmon PLC and Consorcio ARA S 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.