Correlation Between Innospec and Ashtead Group

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

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

Diversification Opportunities for Innospec and Ashtead Group

0.91

Correlation Coefficient

Innospec  Ashtead Group

Almost no diversification

The 3 months correlation between Innospec and Ashtead is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Innospec 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 Innospec 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 Innospec 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 Innospec i.e., Innospec and Ashtead Group go up and down completely randomly.

Pair Corralation between Innospec and Ashtead Group

Given the investment horizon of 90 days Innospec is expected to under-perform the Ashtead Group. But the stock apears to be less risky and, when comparing its historical volatility, Innospec is 1.48 times less risky than Ashtead Group. The stock trades about -0.12 of its potential returns per unit of risk. The Ashtead Group plc is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  6,200  in Ashtead Group plc on December 30, 2024 and sell it today you would lose (697.00) from holding Ashtead Group plc or give up 11.24% of portfolio value over 90 days.

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

Innospec  vs.  Ashtead Group plc

Innospec

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innospec has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Ashtead Group plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ashtead Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Innospec and Ashtead Group

The main advantage of trading using opposite Innospec and Ashtead Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innospec 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 Innospec 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.