Correlation Between United Internet and Ashtead Technology

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

By analyzing existing cross correlation between United Internet AG and Ashtead Technology Holdings, you can compare the effects of market volatilities on United Internet and Ashtead Technology 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 United Internet with a short position of Ashtead Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Internet and Ashtead Technology.

Diversification Opportunities for United Internet and Ashtead Technology

-0.3

Correlation Coefficient

United Internet  Ashtead Technology

Very good diversification

The 3 months correlation between United and Ashtead is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding United Internet AG and Ashtead Technology Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashtead Technology and United Internet 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 United Internet AG are associated (or correlated) with Ashtead Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashtead Technology has no effect on the direction of United Internet i.e., United Internet and Ashtead Technology go up and down completely randomly.

Pair Corralation between United Internet and Ashtead Technology

Assuming the 90 days trading horizon United Internet AG is expected to generate 0.66 times more return on investment than Ashtead Technology. However, United Internet AG is 1.51 times less risky than Ashtead Technology. It trades about 0.11 of its potential returns per unit of risk. Ashtead Technology Holdings is currently generating about -0.03 per unit of risk. If you would invest  1,561  in United Internet AG on December 1, 2024 and sell it today you would earn a total of  195.00  from holding United Internet AG or generate 12.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

United Internet AG  vs.  Ashtead Technology Holdings

United Internet AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Internet AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, United Internet unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ashtead Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ashtead Technology Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Ashtead Technology is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with United Internet and Ashtead Technology

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

The idea behind United Internet AG and Ashtead Technology Holdings 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 Stocks Directory module to find actively traded stocks across global markets.