Correlation Between Montana Technologies and Aspen Aerogels

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

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

Diversification Opportunities for Montana Technologies and Aspen Aerogels

-0.77

Correlation Coefficient

Montana Technologies  Aspen Aerogels

Pay attention - limited upside

The 3 months correlation between Montana and Aspen is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Montana Technologies and Aspen Aerogels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Aerogels and Montana Technologies 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 Montana Technologies are associated (or correlated) with Aspen Aerogels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Aerogels has no effect on the direction of Montana Technologies i.e., Montana Technologies and Aspen Aerogels go up and down completely randomly.

Pair Corralation between Montana Technologies and Aspen Aerogels

Assuming the 90 days horizon Montana Technologies is expected to generate 1.61 times more return on investment than Aspen Aerogels. However, Montana Technologies is 1.61 times more volatile than Aspen Aerogels. It trades about 0.03 of its potential returns per unit of risk. Aspen Aerogels is currently generating about -0.07 per unit of risk. If you would invest  126.00  in Montana Technologies on October 20, 2024 and sell it today you would lose (7.00) from holding Montana Technologies or give up 5.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	92.8%
Values	Daily Returns

Montana Technologies  vs.  Aspen Aerogels

Montana Technologies

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Montana Technologies are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward-looking indicators, Montana Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Aspen Aerogels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aspen Aerogels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Montana Technologies and Aspen Aerogels

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

The idea behind Montana Technologies and Aspen Aerogels 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..