Correlation Between Aspen Aerogels and Lennox International

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

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

Diversification Opportunities for Aspen Aerogels and Lennox International

0.49

Correlation Coefficient

Aspen Aerogels  Lennox International

Very weak diversification

The 3 months correlation between Aspen and Lennox is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Aerogels and Lennox International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennox International and Aspen Aerogels 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 Aspen Aerogels are associated (or correlated) with Lennox International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennox International has no effect on the direction of Aspen Aerogels i.e., Aspen Aerogels and Lennox International go up and down completely randomly.

Pair Corralation between Aspen Aerogels and Lennox International

Given the investment horizon of 90 days Aspen Aerogels is expected to under-perform the Lennox International. In addition to that, Aspen Aerogels is 1.99 times more volatile than Lennox International. It trades about -0.17 of its total potential returns per unit of risk. Lennox International is currently generating about -0.03 per unit of volatility. If you would invest  61,284  in Lennox International on December 28, 2024 and sell it today you would lose (3,552) from holding Lennox International or give up 5.8% of portfolio value over 90 days.

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

Aspen Aerogels  vs.  Lennox International

Aspen Aerogels

Risk-Adjusted Performance

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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Lennox International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lennox International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Lennox International is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Aspen Aerogels and Lennox International

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

The idea behind Aspen Aerogels and Lennox International 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.