Correlation Between Lennar and Persimmon Plc

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Lennar 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 Lennar and Persimmon Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lennar and Persimmon Plc, you can compare the effects of market volatilities on Lennar 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 Lennar with a short position of Persimmon Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lennar and Persimmon Plc.

Diversification Opportunities for Lennar and Persimmon Plc

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Lennar and Persimmon is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Lennar and Persimmon Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Persimmon Plc and Lennar 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 Lennar 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 Lennar i.e., Lennar and Persimmon Plc go up and down completely randomly.

Pair Corralation between Lennar and Persimmon Plc

Considering the 90-day investment horizon Lennar is expected to generate 0.98 times more return on investment than Persimmon Plc. However, Lennar is 1.02 times less risky than Persimmon Plc. It trades about 0.06 of its potential returns per unit of risk. Persimmon Plc is currently generating about -0.34 per unit of risk. If you would invest  17,030  in Lennar on September 1, 2024 and sell it today you would earn a total of  409.00  from holding Lennar or generate 2.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Lennar  vs.  Persimmon Plc

 Performance 
       Timeline  
Lennar 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Lennar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Lennar is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
Persimmon Plc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Lennar and Persimmon Plc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lennar and Persimmon Plc

The main advantage of trading using opposite Lennar and Persimmon Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lennar 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 Lennar 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.
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

Other Complementary Tools

Portfolio Diagnostics
Use generated alerts and portfolio events aggregator to diagnose current holdings
Idea Optimizer
Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio
Volatility Analysis
Get historical volatility and risk analysis based on latest market data
Price Exposure Probability
Analyze equity upside and downside potential for a given time horizon across multiple markets
Odds Of Bankruptcy
Get analysis of equity chance of financial distress in the next 2 years