Correlation Between NIPPON MEAT and Ashtead Group

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

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

Diversification Opportunities for NIPPON MEAT and Ashtead Group

-0.11

Correlation Coefficient

NIPPON MEAT  Ashtead Group

Good diversification

The 3 months correlation between NIPPON and Ashtead is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding NIPPON MEAT PACKERS 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 NIPPON MEAT 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 NIPPON MEAT PACKERS 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 NIPPON MEAT i.e., NIPPON MEAT and Ashtead Group go up and down completely randomly.

Pair Corralation between NIPPON MEAT and Ashtead Group

Assuming the 90 days trading horizon NIPPON MEAT PACKERS is expected to generate 0.76 times more return on investment than Ashtead Group. However, NIPPON MEAT PACKERS is 1.31 times less risky than Ashtead Group. It trades about -0.05 of its potential returns per unit of risk. Ashtead Group plc is currently generating about -0.08 per unit of risk. If you would invest  3,300  in NIPPON MEAT PACKERS on October 4, 2024 and sell it today you would lose (200.00) from holding NIPPON MEAT PACKERS or give up 6.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

NIPPON MEAT PACKERS  vs.  Ashtead Group plc

NIPPON MEAT PACKERS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIPPON MEAT PACKERS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, NIPPON MEAT is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Ashtead Group plc

Risk-Adjusted Performance

0 of 100

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 NIPPON MEAT and Ashtead Group

The main advantage of trading using opposite NIPPON MEAT and Ashtead Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NIPPON MEAT 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 NIPPON MEAT PACKERS 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.