Correlation Between Ashtead Gro and PROG Holdings

Can any of the company-specific risk be diversified away by investing in both Ashtead Gro and PROG 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 PROG 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 PROG Holdings, you can compare the effects of market volatilities on Ashtead Gro and PROG 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 PROG Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ashtead Gro and PROG Holdings.

Diversification Opportunities for Ashtead Gro and PROG Holdings

0.35

Correlation Coefficient

Ashtead Gro  PROG Holdings

Weak diversification

The 3 months correlation between Ashtead and PROG is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ashtead Gro and PROG Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PROG Holdings 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 PROG Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PROG Holdings has no effect on the direction of Ashtead Gro i.e., Ashtead Gro and PROG Holdings go up and down completely randomly.

Pair Corralation between Ashtead Gro and PROG Holdings

Assuming the 90 days horizon Ashtead Gro is expected to generate 0.72 times more return on investment than PROG Holdings. However, Ashtead Gro is 1.4 times less risky than PROG Holdings. It trades about 0.15 of its potential returns per unit of risk. PROG Holdings is currently generating about 0.03 per unit of risk. If you would invest  27,766  in Ashtead Gro on September 4, 2024 and sell it today you would earn a total of  4,622  from holding Ashtead Gro or generate 16.65% return on investment over 90 days.

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

Ashtead Gro  vs.  PROG Holdings

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.

PROG Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PROG Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PROG Holdings is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ashtead Gro and PROG Holdings

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

The idea behind Ashtead Gro and PROG 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.