Correlation Between Ashtead Gro and GATX

Can any of the company-specific risk be diversified away by investing in both Ashtead Gro and GATX 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 Gro and GATX into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ashtead Gro and GATX Corporation, you can compare the effects of market volatilities on Ashtead Gro and GATX 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 Gro with a short position of GATX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ashtead Gro and GATX.

Diversification Opportunities for Ashtead Gro and GATX

0.5

Correlation Coefficient

Ashtead Gro  GATX

Very weak diversification

The 3 months correlation between Ashtead and GATX is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ashtead Gro and GATX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GATX and Ashtead Gro 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 Gro are associated (or correlated) with GATX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GATX has no effect on the direction of Ashtead Gro i.e., Ashtead Gro and GATX go up and down completely randomly.

Pair Corralation between Ashtead Gro and GATX

Assuming the 90 days horizon Ashtead Gro is expected to generate 0.97 times more return on investment than GATX. However, Ashtead Gro is 1.03 times less risky than GATX. It trades about 0.11 of its potential returns per unit of risk. GATX Corporation is currently generating about -0.14 per unit of risk. If you would invest  28,355  in Ashtead Gro on January 25, 2024 and sell it today you would earn a total of  785.00  from holding Ashtead Gro or generate 2.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ashtead Gro  vs.  GATX Corp.

Ashtead Gro

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ashtead Gro are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Ashtead Gro may actually be approaching a critical reversion point that can send shares even higher in May 2024.

GATX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GATX Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, GATX is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ashtead Gro and GATX

The main advantage of trading using opposite Ashtead Gro and GATX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ashtead Gro position performs unexpectedly, GATX 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 GATX will offset losses from the drop in GATX's long position.

The idea behind Ashtead Gro and GATX Corporation 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.

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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.