Correlation Between Sovereign Metals and Ashtead Technology

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

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

Diversification Opportunities for Sovereign Metals and Ashtead Technology

-0.36

Correlation Coefficient

Sovereign Metals  Ashtead Technology

Very good diversification

The 3 months correlation between Sovereign and Ashtead is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sovereign Metals and Ashtead Technology Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashtead Technology and Sovereign Metals 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 Sovereign Metals are associated (or correlated) with Ashtead Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashtead Technology has no effect on the direction of Sovereign Metals i.e., Sovereign Metals and Ashtead Technology go up and down completely randomly.

Pair Corralation between Sovereign Metals and Ashtead Technology

Assuming the 90 days trading horizon Sovereign Metals is expected to generate 0.81 times more return on investment than Ashtead Technology. However, Sovereign Metals is 1.24 times less risky than Ashtead Technology. It trades about 0.21 of its potential returns per unit of risk. Ashtead Technology Holdings is currently generating about 0.02 per unit of risk. If you would invest  3,600  in Sovereign Metals on December 24, 2024 and sell it today you would earn a total of  1,200  from holding Sovereign Metals or generate 33.33% return on investment over 90 days.

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

Sovereign Metals  vs.  Ashtead Technology Holdings

Sovereign Metals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sovereign Metals are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Sovereign Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 1 (%) 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.

Pair Trading with Sovereign Metals and Ashtead Technology

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

The idea behind Sovereign Metals and Ashtead Technology Holdings 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.