Correlation Between VMware and PERSIMMON PLC
Can any of the company-specific risk be diversified away by investing in both VMware 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 VMware and PERSIMMON PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VMware Inc and PERSIMMON PLC , you can compare the effects of market volatilities on VMware 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 VMware with a short position of PERSIMMON PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of VMware and PERSIMMON PLC.
Diversification Opportunities for VMware and PERSIMMON PLC
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between VMware and PERSIMMON is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding VMware Inc and PERSIMMON PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PERSIMMON PLC and VMware 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 VMware Inc 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 VMware i.e., VMware and PERSIMMON PLC go up and down completely randomly.
Pair Corralation between VMware and PERSIMMON PLC
Considering the 90-day investment horizon VMware is expected to generate 3.92 times less return on investment than PERSIMMON PLC. But when comparing it to its historical volatility, VMware Inc is 1.23 times less risky than PERSIMMON PLC. It trades about 0.02 of its potential returns per unit of risk. PERSIMMON PLC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,176 in PERSIMMON PLC on January 24, 2024 and sell it today you would earn a total of 262.00 from holding PERSIMMON PLC or generate 22.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 49.76% |
| Values | Daily Returns |
VMware Inc vs. PERSIMMON PLC
Performance |
| Timeline |
| VMware Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| PERSIMMON PLC |
VMware and PERSIMMON PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VMware and PERSIMMON PLC
The main advantage of trading using opposite VMware and PERSIMMON PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VMware 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 VMware Inc 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.| PERSIMMON PLC vs. BJS RESTAURANTS | PERSIMMON PLC vs. ELECTRONIC ARTS | PERSIMMON PLC vs. UMC Electronics Co | PERSIMMON PLC vs. United Utilities Group |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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