Correlation Between GlobalData PLC and Ashtead Technology

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

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

Diversification Opportunities for GlobalData PLC and Ashtead Technology

-0.1

Correlation Coefficient

GlobalData PLC  Ashtead Technology

Good diversification

The 3 months correlation between GlobalData and Ashtead is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding GlobalData PLC and Ashtead Technology Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashtead Technology and GlobalData PLC 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 GlobalData PLC 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 GlobalData PLC i.e., GlobalData PLC and Ashtead Technology go up and down completely randomly.

Pair Corralation between GlobalData PLC and Ashtead Technology

Assuming the 90 days trading horizon GlobalData PLC is expected to under-perform the Ashtead Technology. But the stock apears to be less risky and, when comparing its historical volatility, GlobalData PLC is 1.38 times less risky than Ashtead Technology. The stock trades about -0.31 of its potential returns per unit of risk. The Ashtead Technology Holdings is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  54,400  in Ashtead Technology Holdings on September 28, 2024 and sell it today you would lose (400.00) from holding Ashtead Technology Holdings or give up 0.74% of portfolio value over 90 days.

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

GlobalData PLC  vs.  Ashtead Technology Holdings

GlobalData PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GlobalData PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 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 GlobalData PLC and Ashtead Technology

The main advantage of trading using opposite GlobalData PLC and Ashtead Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlobalData PLC 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 GlobalData PLC 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.