Correlation Between GM and Ashtead Group
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Ashtead Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Ashtead Group plc, you can compare the effects of market volatilities on GM 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 GM with a short position of Ashtead Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Ashtead Group.
Diversification Opportunities for GM and Ashtead Group
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Ashtead is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and Ashtead Group go up and down completely randomly.
Pair Corralation between GM and Ashtead Group
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.0 times more return on investment than Ashtead Group. However, General Motors is 1.0 times less risky than Ashtead Group. It trades about 0.06 of its potential returns per unit of risk. Ashtead Group plc is currently generating about 0.04 per unit of risk. If you would invest 3,525 in General Motors on August 31, 2024 and sell it today you would earn a total of 2,034 from holding General Motors or generate 57.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.56% |
| Values | Daily Returns |
General Motors vs. Ashtead Group plc
Performance |
| Timeline |
| General Motors |
| Ashtead Group plc |
GM and Ashtead Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Ashtead Group
The main advantage of trading using opposite GM and Ashtead Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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.The idea behind General Motors and Ashtead Group plc 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.| Ashtead Group vs. HYATT HOTELS A | Ashtead Group vs. Fevertree Drinks PLC | Ashtead Group vs. Xenia Hotels Resorts | Ashtead Group vs. BOSTON BEER A |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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