Correlation Between Ashtead Technology and Light Science

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

Diversification Opportunities for Ashtead Technology and Light Science

-0.02

Correlation Coefficient

Ashtead Technology  Light Science

Good diversification

The 3 months correlation between Ashtead and Light is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ashtead Technology Holdings and Light Science Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Light Science Techno 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 Light Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Light Science Techno has no effect on the direction of Ashtead Technology i.e., Ashtead Technology and Light Science go up and down completely randomly.

Pair Corralation between Ashtead Technology and Light Science

Assuming the 90 days trading horizon Ashtead Technology Holdings is expected to generate 0.79 times more return on investment than Light Science. However, Ashtead Technology Holdings is 1.27 times less risky than Light Science. It trades about 0.1 of its potential returns per unit of risk. Light Science Technologies is currently generating about -0.22 per unit of risk. If you would invest  56,100  in Ashtead Technology Holdings on October 8, 2024 and sell it today you would earn a total of  1,900  from holding Ashtead Technology Holdings or generate 3.39% return on investment over 90 days.

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

Ashtead Technology Holdings  vs.  Light Science Technologies

Ashtead Technology

Risk-Adjusted Performance

2 of 100

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Light Science Techno

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Light Science Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Light Science is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ashtead Technology and Light Science

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

The idea behind Ashtead Technology Holdings and Light Science Technologies 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.