Correlation Between Ashtead Technology and Solstad Offshore

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

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

Diversification Opportunities for Ashtead Technology and Solstad Offshore

0.24

Correlation Coefficient

Ashtead Technology  Solstad Offshore

Modest diversification

The 3 months correlation between Ashtead and Solstad is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ashtead Technology Holdings and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA and Ashtead Technology 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 Technology Holdings are associated (or correlated) with Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of Ashtead Technology i.e., Ashtead Technology and Solstad Offshore go up and down completely randomly.

Pair Corralation between Ashtead Technology and Solstad Offshore

Assuming the 90 days trading horizon Ashtead Technology Holdings is expected to under-perform the Solstad Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Ashtead Technology Holdings is 1.2 times less risky than Solstad Offshore. The stock trades about -0.06 of its potential returns per unit of risk. The Solstad Offshore ASA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,428  in Solstad Offshore ASA on September 4, 2024 and sell it today you would earn a total of  692.00  from holding Solstad Offshore ASA or generate 20.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.92%
Values	Daily Returns

Ashtead Technology Holdings  vs.  Solstad Offshore ASA

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 latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Solstad Offshore ASA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solstad Offshore ASA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Solstad Offshore unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ashtead Technology and Solstad Offshore

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

The idea behind Ashtead Technology Holdings and Solstad Offshore ASA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.