Correlation Between Advanced Medical and Ashtead Technology

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

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

Diversification Opportunities for Advanced Medical and Ashtead Technology

0.2

Correlation Coefficient

Advanced Medical  Ashtead Technology

Modest diversification

The 3 months correlation between Advanced and Ashtead is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Medical Solutions and Ashtead Technology Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashtead Technology and Advanced Medical 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 Advanced Medical Solutions 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 Advanced Medical i.e., Advanced Medical and Ashtead Technology go up and down completely randomly.

Pair Corralation between Advanced Medical and Ashtead Technology

Assuming the 90 days trading horizon Advanced Medical Solutions is expected to generate 1.14 times more return on investment than Ashtead Technology. However, Advanced Medical is 1.14 times more volatile than Ashtead Technology Holdings. It trades about -0.07 of its potential returns per unit of risk. Ashtead Technology Holdings is currently generating about -0.08 per unit of risk. If you would invest  22,920  in Advanced Medical Solutions on September 22, 2024 and sell it today you would lose (3,320) from holding Advanced Medical Solutions or give up 14.49% of portfolio value over 90 days.

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

Advanced Medical Solutions  vs.  Ashtead Technology Holdings

Advanced Medical Sol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Medical Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Ashtead Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ashtead Technology Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Advanced Medical and Ashtead Technology

The main advantage of trading using opposite Advanced Medical and Ashtead Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Medical 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 Advanced Medical Solutions 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.