Correlation Between African Discovery and Ashtead Group
Can any of the company-specific risk be diversified away by investing in both African Discovery and Ashtead Group 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 African Discovery and Ashtead Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between African Discovery Group and Ashtead Group plc, you can compare the effects of market volatilities on African Discovery and Ashtead Group 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 African Discovery with a short position of Ashtead Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of African Discovery and Ashtead Group.
Diversification Opportunities for African Discovery and Ashtead Group
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between African and Ashtead is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding African Discovery Group and Ashtead Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashtead Group plc and African Discovery 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 African Discovery Group are associated (or correlated) with Ashtead Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashtead Group plc has no effect on the direction of African Discovery i.e., African Discovery and Ashtead Group go up and down completely randomly.
Pair Corralation between African Discovery and Ashtead Group
Given the investment horizon of 90 days African Discovery Group is expected to generate 7.14 times more return on investment than Ashtead Group. However, African Discovery is 7.14 times more volatile than Ashtead Group plc. It trades about 0.05 of its potential returns per unit of risk. Ashtead Group plc is currently generating about 0.02 per unit of risk. If you would invest 4.60 in African Discovery Group on November 2, 2024 and sell it today you would lose (3.70) from holding African Discovery Group or give up 80.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.99% |
| Values | Daily Returns |
African Discovery Group vs. Ashtead Group plc
Performance |
| Timeline |
| African Discovery |
| Ashtead Group plc |
African Discovery and Ashtead Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with African Discovery and Ashtead Group
The main advantage of trading using opposite African Discovery and Ashtead Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if African Discovery position performs unexpectedly, Ashtead Group 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 Group will offset losses from the drop in Ashtead Group's long position.| African Discovery vs. Black Diamond Group | African Discovery vs. Alta Equipment Group | African Discovery vs. Ashtead Group plc | African Discovery vs. BOC Aviation Limited |
| Ashtead Group vs. African Discovery Group | Ashtead Group vs. Emeco Holdings Limited | Ashtead Group vs. Solution Financial | Ashtead Group vs. BOC Aviation Limited |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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