Correlation Between Rolls Royce and Ashtead Technology
Can any of the company-specific risk be diversified away by investing in both Rolls Royce 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 Rolls Royce and Ashtead Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rolls Royce Holdings PLC and Ashtead Technology Holdings, you can compare the effects of market volatilities on Rolls Royce 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 Rolls Royce with a short position of Ashtead Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rolls Royce and Ashtead Technology.
Diversification Opportunities for Rolls Royce and Ashtead Technology
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Rolls and Ashtead is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings 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 Rolls Royce 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 Rolls Royce Holdings 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 Rolls Royce i.e., Rolls Royce and Ashtead Technology go up and down completely randomly.
Pair Corralation between Rolls Royce and Ashtead Technology
Assuming the 90 days trading horizon Rolls Royce Holdings PLC is expected to generate 0.83 times more return on investment than Ashtead Technology. However, Rolls Royce Holdings PLC is 1.21 times less risky than Ashtead Technology. It trades about 0.2 of its potential returns per unit of risk. Ashtead Technology Holdings is currently generating about -0.03 per unit of risk. If you would invest 54,260 in Rolls Royce Holdings PLC on September 24, 2024 and sell it today you would earn a total of 3,280 from holding Rolls Royce Holdings PLC or generate 6.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rolls Royce Holdings PLC vs. Ashtead Technology Holdings
Performance |
| Timeline |
| Rolls Royce Holdings |
| Ashtead Technology |
Rolls Royce and Ashtead Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rolls Royce and Ashtead Technology
The main advantage of trading using opposite Rolls Royce and Ashtead Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rolls Royce 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.| Rolls Royce vs. Samsung Electronics Co | Rolls Royce vs. Samsung Electronics Co | Rolls Royce vs. Hyundai Motor | Rolls Royce vs. Toyota Motor Corp |
| Ashtead Technology vs. Zoom Video Communications | Ashtead Technology vs. Enbridge | Ashtead Technology vs. Endo International PLC | Ashtead Technology vs. Rolls Royce Holdings PLC |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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