Correlation Between Ashtead Gro and Solution Financial

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

By analyzing existing cross correlation between Ashtead Gro and Solution Financial, you can compare the effects of market volatilities on Ashtead Gro and Solution Financial 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 Solution Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ashtead Gro and Solution Financial.

Diversification Opportunities for Ashtead Gro and Solution Financial

-0.27

Correlation Coefficient

Ashtead Gro  Solution Financial

Very good diversification

The 3 months correlation between Ashtead and Solution is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Ashtead Gro and Solution Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Financial 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 Solution Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Financial has no effect on the direction of Ashtead Gro i.e., Ashtead Gro and Solution Financial go up and down completely randomly.

Pair Corralation between Ashtead Gro and Solution Financial

Assuming the 90 days horizon Ashtead Gro is expected to under-perform the Solution Financial. But the pink sheet apears to be less risky and, when comparing its historical volatility, Ashtead Gro is 1.38 times less risky than Solution Financial. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Solution Financial is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  20.00  in Solution Financial on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Solution Financial or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Ashtead Gro  vs.  Solution Financial

Ashtead Gro

Risk-Adjusted Performance

Very Weak

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

Solution Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solution Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Solution Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ashtead Gro and Solution Financial

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

The idea behind Ashtead Gro and Solution Financial 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.