Correlation Between Consorcio ARA and Persimmon PLC

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

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

Diversification Opportunities for Consorcio ARA and Persimmon PLC

0.09

Correlation Coefficient

Consorcio ARA  Persimmon PLC

Significant diversification

The 3 months correlation between Consorcio and Persimmon is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Consorcio ARA S and Persimmon PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Persimmon PLC and Consorcio ARA 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 Consorcio ARA S 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 Consorcio ARA i.e., Consorcio ARA and Persimmon PLC go up and down completely randomly.

Pair Corralation between Consorcio ARA and Persimmon PLC

Assuming the 90 days horizon Consorcio ARA S is expected to generate 3.61 times more return on investment than Persimmon PLC. However, Consorcio ARA is 3.61 times more volatile than Persimmon PLC. It trades about -0.01 of its potential returns per unit of risk. Persimmon PLC is currently generating about -0.16 per unit of risk. If you would invest  17.00  in Consorcio ARA S on September 1, 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

Consorcio ARA S  vs.  Persimmon PLC

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 fragile 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.

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 fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Consorcio ARA and Persimmon PLC

The main advantage of trading using opposite Consorcio ARA and Persimmon PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consorcio ARA 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 Consorcio ARA S 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.