Correlation Between Ashtead Technology and Merit Group
Can any of the company-specific risk be diversified away by investing in both Ashtead Technology and Merit 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 Ashtead Technology and Merit Group 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 Merit Group PLC, you can compare the effects of market volatilities on Ashtead Technology and Merit 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 Ashtead Technology with a short position of Merit Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ashtead Technology and Merit Group.
Diversification Opportunities for Ashtead Technology and Merit Group
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ashtead and Merit is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Ashtead Technology Holdings and Merit Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merit Group PLC 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 Merit Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merit Group PLC has no effect on the direction of Ashtead Technology i.e., Ashtead Technology and Merit Group go up and down completely randomly.
Pair Corralation between Ashtead Technology and Merit Group
Assuming the 90 days trading horizon Ashtead Technology Holdings is expected to generate 0.74 times more return on investment than Merit Group. However, Ashtead Technology Holdings is 1.35 times less risky than Merit Group. It trades about -0.08 of its potential returns per unit of risk. Merit Group PLC is currently generating about -0.12 per unit of risk. If you would invest 80,200 in Ashtead Technology Holdings on September 1, 2024 and sell it today you would lose (25,100) from holding Ashtead Technology Holdings or give up 31.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.23% |
| Values | Daily Returns |
Ashtead Technology Holdings vs. Merit Group PLC
Performance |
| Timeline |
| Ashtead Technology |
| Merit Group PLC |
Ashtead Technology and Merit Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ashtead Technology and Merit Group
The main advantage of trading using opposite Ashtead Technology and Merit Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ashtead Technology position performs unexpectedly, Merit 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 Merit Group will offset losses from the drop in Merit Group's long position.| Ashtead Technology vs. Orient Telecoms | Ashtead Technology vs. Auction Technology Group | Ashtead Technology vs. Sabien Technology Group | Ashtead Technology vs. DXC Technology Co |
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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