Correlation Between Coloplast and Ashtead Gro

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

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

Diversification Opportunities for Coloplast and Ashtead Gro

-0.65

Correlation Coefficient

Coloplast  Ashtead Gro

Excellent diversification

The 3 months correlation between Coloplast and Ashtead is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Coloplast A and Ashtead Gro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashtead Gro and Coloplast 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 Coloplast A are associated (or correlated) with Ashtead Gro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashtead Gro has no effect on the direction of Coloplast i.e., Coloplast and Ashtead Gro go up and down completely randomly.

Pair Corralation between Coloplast and Ashtead Gro

Assuming the 90 days horizon Coloplast A is expected to under-perform the Ashtead Gro. But the pink sheet apears to be less risky and, when comparing its historical volatility, Coloplast A is 1.22 times less risky than Ashtead Gro. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Ashtead Gro is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  27,766  in Ashtead Gro on September 4, 2024 and sell it today you would earn a total of  4,622  from holding Ashtead Gro or generate 16.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Coloplast A  vs.  Ashtead Gro

Coloplast A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coloplast A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Ashtead Gro

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ashtead Gro are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Ashtead Gro showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coloplast and Ashtead Gro

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

The idea behind Coloplast A and Ashtead Gro 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 Global Correlations module to find global opportunities by holding instruments from different markets.