Correlation Between Technicolor and Ashtead Group

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

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

Diversification Opportunities for Technicolor and Ashtead Group

-0.82

Correlation Coefficient

Technicolor  Ashtead Group

Pay attention - limited upside

The 3 months correlation between Technicolor and Ashtead is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Technicolor and Ashtead Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashtead Group PLC and Technicolor 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 Technicolor are associated (or correlated) with Ashtead Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashtead Group PLC has no effect on the direction of Technicolor i.e., Technicolor and Ashtead Group go up and down completely randomly.

Pair Corralation between Technicolor and Ashtead Group

Assuming the 90 days trading horizon Technicolor is expected to generate 3.03 times more return on investment than Ashtead Group. However, Technicolor is 3.03 times more volatile than Ashtead Group PLC. It trades about 0.13 of its potential returns per unit of risk. Ashtead Group PLC is currently generating about -0.08 per unit of risk. If you would invest  12.00  in Technicolor on December 25, 2024 and sell it today you would earn a total of  5.00  from holding Technicolor or generate 41.67% return on investment over 90 days.

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

Technicolor  vs.  Ashtead Group PLC

Technicolor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Technicolor are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Technicolor unveiled solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Technicolor and Ashtead Group

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

The idea behind Technicolor and Ashtead Group 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.