Correlation Between PulteGroup and Persimmon PLC

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

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

Diversification Opportunities for PulteGroup and Persimmon PLC

0.36

Correlation Coefficient

PulteGroup  Persimmon PLC

Weak diversification

The 3 months correlation between PulteGroup and Persimmon is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding PulteGroup and Persimmon PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Persimmon PLC and PulteGroup 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 PulteGroup 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 PulteGroup i.e., PulteGroup and Persimmon PLC go up and down completely randomly.

Pair Corralation between PulteGroup and Persimmon PLC

Considering the 90-day investment horizon PulteGroup is expected to generate 0.64 times more return on investment than Persimmon PLC. However, PulteGroup is 1.55 times less risky than Persimmon PLC. It trades about 0.05 of its potential returns per unit of risk. Persimmon PLC is currently generating about -0.16 per unit of risk. If you would invest  12,861  in PulteGroup on September 3, 2024 and sell it today you would earn a total of  666.00  from holding PulteGroup or generate 5.18% return on investment over 90 days.

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

PulteGroup  vs.  Persimmon PLC

PulteGroup

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PulteGroup are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, PulteGroup 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

Very Weak

Over the last 90 days Persimmon PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak 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.

Pair Trading with PulteGroup and Persimmon PLC

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