Correlation Between Eshallgo and Ashtead Group

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

By analyzing existing cross correlation between Eshallgo Class A and Ashtead Group plc, you can compare the effects of market volatilities on Eshallgo and Ashtead Group 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 Eshallgo with a short position of Ashtead Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eshallgo and Ashtead Group.

Diversification Opportunities for Eshallgo and Ashtead Group

0.64

Correlation Coefficient

Eshallgo  Ashtead Group

Poor diversification

The 3 months correlation between Eshallgo and Ashtead is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Eshallgo Class A and Ashtead Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashtead Group plc and Eshallgo 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 Eshallgo Class A are associated (or correlated) with Ashtead Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashtead Group plc has no effect on the direction of Eshallgo i.e., Eshallgo and Ashtead Group go up and down completely randomly.

Pair Corralation between Eshallgo and Ashtead Group

Given the investment horizon of 90 days Eshallgo Class A is expected to generate 3.54 times more return on investment than Ashtead Group. However, Eshallgo is 3.54 times more volatile than Ashtead Group plc. It trades about 0.15 of its potential returns per unit of risk. Ashtead Group plc is currently generating about 0.12 per unit of risk. If you would invest  215.00  in Eshallgo Class A on September 3, 2024 and sell it today you would earn a total of  150.00  from holding Eshallgo Class A or generate 69.77% return on investment over 90 days.

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

Eshallgo Class A  vs.  Ashtead Group plc

Eshallgo Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eshallgo Class A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, Eshallgo displayed solid returns over the last few months and may actually be approaching a breakup point.

Ashtead Group plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ashtead Group plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ashtead Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eshallgo and Ashtead Group

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

The idea behind Eshallgo Class A and Ashtead Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.