Correlation Between Smithson Investment and Ashtead Technology

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

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

Diversification Opportunities for Smithson Investment and Ashtead Technology

-0.36

Correlation Coefficient

Smithson Investment  Ashtead Technology

Very good diversification

The 3 months correlation between Smithson and Ashtead is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Smithson Investment Trust and Ashtead Technology Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashtead Technology and Smithson Investment 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 Smithson Investment Trust 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 Smithson Investment i.e., Smithson Investment and Ashtead Technology go up and down completely randomly.

Pair Corralation between Smithson Investment and Ashtead Technology

Assuming the 90 days trading horizon Smithson Investment Trust is expected to generate 0.31 times more return on investment than Ashtead Technology. However, Smithson Investment Trust is 3.2 times less risky than Ashtead Technology. It trades about 0.13 of its potential returns per unit of risk. Ashtead Technology Holdings is currently generating about -0.05 per unit of risk. If you would invest  141,600  in Smithson Investment Trust on September 12, 2024 and sell it today you would earn a total of  9,800  from holding Smithson Investment Trust or generate 6.92% return on investment over 90 days.

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

Smithson Investment Trust  vs.  Ashtead Technology Holdings

Smithson Investment Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smithson Investment Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Smithson Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Smithson Investment and Ashtead Technology

The main advantage of trading using opposite Smithson Investment and Ashtead Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smithson Investment 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 Smithson Investment Trust 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..