Correlation Between Ashtead Gro and AerCap Holdings

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

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

Diversification Opportunities for Ashtead Gro and AerCap Holdings

0.7

Correlation Coefficient

Ashtead Gro  AerCap Holdings

Poor diversification

The 3 months correlation between Ashtead and AerCap is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ashtead Gro and AerCap Holdings NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AerCap Holdings NV and Ashtead Gro 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 Gro are associated (or correlated) with AerCap Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AerCap Holdings NV has no effect on the direction of Ashtead Gro i.e., Ashtead Gro and AerCap Holdings go up and down completely randomly.

Pair Corralation between Ashtead Gro and AerCap Holdings

Assuming the 90 days horizon Ashtead Gro is expected to generate 1.34 times more return on investment than AerCap Holdings. However, Ashtead Gro is 1.34 times more volatile than AerCap Holdings NV. It trades about 0.14 of its potential returns per unit of risk. AerCap Holdings NV is currently generating about 0.1 per unit of risk. If you would invest  28,258  in Ashtead Gro on September 2, 2024 and sell it today you would earn a total of  4,386  from holding Ashtead Gro or generate 15.52% return on investment over 90 days.

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

Ashtead Gro  vs.  AerCap Holdings NV

Ashtead Gro

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ashtead Gro are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Ashtead Gro showed solid returns over the last few months and may actually be approaching a breakup point.

AerCap Holdings NV

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AerCap Holdings NV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, AerCap Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ashtead Gro and AerCap Holdings

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

The idea behind Ashtead Gro and AerCap Holdings NV 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 Global Correlations module to find global opportunities by holding instruments from different markets.