Correlation Between Ashtead Technology and GSTechnologies

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

Diversification Opportunities for Ashtead Technology and GSTechnologies

0.42

Correlation Coefficient

Ashtead Technology  GSTechnologies

Very weak diversification

The 3 months correlation between Ashtead and GSTechnologies is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ashtead Technology Holdings and GSTechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSTechnologies 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 GSTechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSTechnologies has no effect on the direction of Ashtead Technology i.e., Ashtead Technology and GSTechnologies go up and down completely randomly.

Pair Corralation between Ashtead Technology and GSTechnologies

Assuming the 90 days trading horizon Ashtead Technology is expected to generate 2.09 times less return on investment than GSTechnologies. But when comparing it to its historical volatility, Ashtead Technology Holdings is 2.4 times less risky than GSTechnologies. It trades about 0.03 of its potential returns per unit of risk. GSTechnologies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  220.00  in GSTechnologies on December 26, 2024 and sell it today you would lose (7.00) from holding GSTechnologies or give up 3.18% of portfolio value over 90 days.

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

Ashtead Technology Holdings  vs.  GSTechnologies

Ashtead Technology

Risk-Adjusted Performance

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.

GSTechnologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GSTechnologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, GSTechnologies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ashtead Technology and GSTechnologies

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

The idea behind Ashtead Technology Holdings and GSTechnologies 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.