Correlation Between Ashtead Technology and Indutrade

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

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

Diversification Opportunities for Ashtead Technology and Indutrade

0.72

Correlation Coefficient

Ashtead Technology  Indutrade

Poor diversification

The 3 months correlation between Ashtead and Indutrade is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ashtead Technology Holdings and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade AB and Ashtead Technology 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 Technology Holdings are associated (or correlated) with Indutrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indutrade AB has no effect on the direction of Ashtead Technology i.e., Ashtead Technology and Indutrade go up and down completely randomly.

Pair Corralation between Ashtead Technology and Indutrade

Assuming the 90 days trading horizon Ashtead Technology Holdings is expected to under-perform the Indutrade. In addition to that, Ashtead Technology is 2.02 times more volatile than Indutrade AB. It trades about -0.04 of its total potential returns per unit of risk. Indutrade AB is currently generating about -0.05 per unit of volatility. If you would invest  30,210  in Indutrade AB on September 13, 2024 and sell it today you would lose (1,560) from holding Indutrade AB or give up 5.16% of portfolio value over 90 days.

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

Ashtead Technology Holdings  vs.  Indutrade AB

Ashtead Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ashtead Technology Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Indutrade AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indutrade AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Indutrade is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ashtead Technology and Indutrade

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

The idea behind Ashtead Technology Holdings and Indutrade AB 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.