Correlation Between Aspen Technology and BOS Better

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

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

Diversification Opportunities for Aspen Technology and BOS Better

0.78

Correlation Coefficient

Aspen Technology  BOS Better

Poor diversification

The 3 months correlation between Aspen and BOS is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Technology and BOS Better Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOS Better Online and Aspen Technology 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 Technology are associated (or correlated) with BOS Better. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOS Better Online has no effect on the direction of Aspen Technology i.e., Aspen Technology and BOS Better go up and down completely randomly.

Pair Corralation between Aspen Technology and BOS Better

Given the investment horizon of 90 days Aspen Technology is expected to generate 17.81 times less return on investment than BOS Better. But when comparing it to its historical volatility, Aspen Technology is 9.94 times less risky than BOS Better. It trades about 0.1 of its potential returns per unit of risk. BOS Better Online is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  334.00  in BOS Better Online on October 22, 2024 and sell it today you would earn a total of  45.00  from holding BOS Better Online or generate 13.47% return on investment over 90 days.

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

Aspen Technology  vs.  BOS Better Online

Aspen Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aspen Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Aspen Technology is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

BOS Better Online

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BOS Better Online are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, BOS Better exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aspen Technology and BOS Better

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

The idea behind Aspen Technology and BOS Better Online 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.