Correlation Between Persimmon PLC and Redrow Plc

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

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

Diversification Opportunities for Persimmon PLC and Redrow Plc

0.0

Correlation Coefficient

Persimmon PLC  Redrow Plc

Pay attention - limited upside

The 3 months correlation between Persimmon and Redrow is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Persimmon PLC and Redrow Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redrow Plc 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 Redrow Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redrow Plc has no effect on the direction of Persimmon PLC i.e., Persimmon PLC and Redrow Plc go up and down completely randomly.

Pair Corralation between Persimmon PLC and Redrow Plc

If you would invest (100.00) in Redrow Plc on December 31, 2024 and sell it today you would earn a total of  100.00  from holding Redrow Plc or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Persimmon PLC  vs.  Redrow Plc

Persimmon PLC

Risk-Adjusted Performance

Very Weak

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

Redrow Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Redrow Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Redrow Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Persimmon PLC and Redrow Plc

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

The idea behind Persimmon PLC and Redrow 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.