Correlation Between Ashtead Technology and BP Plc

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

Diversification Opportunities for Ashtead Technology and BP Plc

0.31

Correlation Coefficient

Ashtead Technology  BP Plc

Weak diversification

The 3 months correlation between Ashtead and BP-A is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ashtead Technology Holdings and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc 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 BP Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP plc has no effect on the direction of Ashtead Technology i.e., Ashtead Technology and BP Plc go up and down completely randomly.

Pair Corralation between Ashtead Technology and BP Plc

Assuming the 90 days trading horizon Ashtead Technology Holdings is expected to generate 1.25 times more return on investment than BP Plc. However, Ashtead Technology is 1.25 times more volatile than BP plc. It trades about 0.02 of its potential returns per unit of risk. BP plc is currently generating about -0.16 per unit of risk. If you would invest  53,200  in Ashtead Technology Holdings on October 11, 2024 and sell it today you would earn a total of  300.00  from holding Ashtead Technology Holdings or generate 0.56% return on investment over 90 days.

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

Ashtead Technology Holdings  vs.  BP plc

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 rather sound basic indicators, Ashtead Technology is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

BP plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BP plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ashtead Technology and BP Plc

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

The idea behind Ashtead Technology Holdings and BP plc 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.