Correlation Between Solution Financial and Ashtead Group
Can any of the company-specific risk be diversified away by investing in both Solution Financial 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 Solution Financial and Ashtead Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solution Financial and Ashtead Group plc, you can compare the effects of market volatilities on Solution Financial 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 Solution Financial with a short position of Ashtead Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solution Financial and Ashtead Group.
Diversification Opportunities for Solution Financial and Ashtead Group
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Solution and Ashtead is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Solution Financial 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 Solution Financial 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 Solution Financial 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 Solution Financial i.e., Solution Financial and Ashtead Group go up and down completely randomly.
Pair Corralation between Solution Financial and Ashtead Group
Assuming the 90 days horizon Solution Financial is expected to under-perform the Ashtead Group. In addition to that, Solution Financial is 1.35 times more volatile than Ashtead Group plc. It trades about -0.07 of its total potential returns per unit of risk. Ashtead Group plc is currently generating about 0.15 per unit of volatility. If you would invest 7,602 in Ashtead Group plc on August 28, 2024 and sell it today you would earn a total of 505.00 from holding Ashtead Group plc or generate 6.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solution Financial vs. Ashtead Group plc
Performance |
| Timeline |
| Solution Financial |
| Ashtead Group plc |
Solution Financial and Ashtead Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solution Financial and Ashtead Group
The main advantage of trading using opposite Solution Financial and Ashtead Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solution Financial 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.| Solution Financial vs. United Rentals | Solution Financial vs. AerCap Holdings NV | Solution Financial vs. Fortress Transp Infra | Solution Financial vs. U Haul Holding |
| 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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