Correlation Between Ashtead Technology and Volkswagen

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

Diversification Opportunities for Ashtead Technology and Volkswagen

-0.48

Correlation Coefficient

Ashtead Technology  Volkswagen

Very good diversification

The 3 months correlation between Ashtead and Volkswagen is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ashtead Technology Holdings and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG has no effect on the direction of Ashtead Technology i.e., Ashtead Technology and Volkswagen go up and down completely randomly.

Pair Corralation between Ashtead Technology and Volkswagen

Assuming the 90 days trading horizon Ashtead Technology is expected to generate 2.66 times less return on investment than Volkswagen. In addition to that, Ashtead Technology is 1.43 times more volatile than Volkswagen AG. It trades about 0.03 of its total potential returns per unit of risk. Volkswagen AG is currently generating about 0.12 per unit of volatility. If you would invest  9,115  in Volkswagen AG on December 26, 2024 and sell it today you would earn a total of  1,450  from holding Volkswagen AG or generate 15.91% return on investment over 90 days.

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

Ashtead Technology Holdings  vs.  Volkswagen AG

Ashtead Technology

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ashtead Technology Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Ashtead Technology is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Volkswagen AG

Risk-Adjusted Performance

OK

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

Pair Trading with Ashtead Technology and Volkswagen

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

The idea behind Ashtead Technology Holdings and Volkswagen AG 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.