Correlation Between Ashtead Group and ALD SA

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

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

Diversification Opportunities for Ashtead Group and ALD SA

0.12

Correlation Coefficient

Ashtead Group  ALD SA

Average diversification

The 3 months correlation between Ashtead and ALD is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Ashtead Group plc and ALD SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALD SA and Ashtead Group 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 Group plc are associated (or correlated) with ALD SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALD SA has no effect on the direction of Ashtead Group i.e., Ashtead Group and ALD SA go up and down completely randomly.

Pair Corralation between Ashtead Group and ALD SA

Assuming the 90 days horizon Ashtead Group plc is expected to under-perform the ALD SA. In addition to that, Ashtead Group is 1.31 times more volatile than ALD SA. It trades about -0.29 of its total potential returns per unit of risk. ALD SA is currently generating about 0.04 per unit of volatility. If you would invest  602.00  in ALD SA on September 23, 2024 and sell it today you would earn a total of  8.00  from holding ALD SA or generate 1.33% return on investment over 90 days.

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

Ashtead Group plc  vs.  ALD SA

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.

ALD SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ALD SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ALD SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ashtead Group and ALD SA

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

The idea behind Ashtead Group plc and ALD SA 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.