Correlation Between Ashtead Group and WILLIS LEASE

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

By analyzing existing cross correlation between Ashtead Group plc and WILLIS LEASE FIN, you can compare the effects of market volatilities on Ashtead Group and WILLIS LEASE 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 Ashtead Group with a short position of WILLIS LEASE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ashtead Group and WILLIS LEASE.

Diversification Opportunities for Ashtead Group and WILLIS LEASE

0.63

Correlation Coefficient

Ashtead Group  WILLIS LEASE

Poor diversification

The 3 months correlation between Ashtead and WILLIS is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ashtead Group plc and WILLIS LEASE FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WILLIS LEASE FIN and Ashtead Group 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 Ashtead Group plc are associated (or correlated) with WILLIS LEASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WILLIS LEASE FIN has no effect on the direction of Ashtead Group i.e., Ashtead Group and WILLIS LEASE go up and down completely randomly.

Pair Corralation between Ashtead Group and WILLIS LEASE

Assuming the 90 days horizon Ashtead Group plc is expected to generate 0.63 times more return on investment than WILLIS LEASE. However, Ashtead Group plc is 1.59 times less risky than WILLIS LEASE. It trades about -0.09 of its potential returns per unit of risk. WILLIS LEASE FIN is currently generating about -0.08 per unit of risk. If you would invest  5,866  in Ashtead Group plc on December 30, 2024 and sell it today you would lose (766.00) from holding Ashtead Group plc or give up 13.06% of portfolio value over 90 days.

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

Ashtead Group plc  vs.  WILLIS LEASE FIN

Ashtead Group plc

Risk-Adjusted Performance

Very Weak

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

WILLIS LEASE FIN

Risk-Adjusted Performance

Very Weak

Over the last 90 days WILLIS LEASE FIN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ashtead Group and WILLIS LEASE

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

The idea behind Ashtead Group plc and WILLIS LEASE FIN 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.