Correlation Between Aspen Technology and Latch

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

By analyzing existing cross correlation between Aspen Technology and Latch Inc, you can compare the effects of market volatilities on Aspen Technology and Latch 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 Latch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aspen Technology and Latch.

Diversification Opportunities for Aspen Technology and Latch

0.0

Correlation Coefficient

Aspen Technology  Latch

Pay attention - limited upside

The 3 months correlation between Aspen and Latch is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Technology and Latch Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Latch Inc 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 Latch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Latch Inc has no effect on the direction of Aspen Technology i.e., Aspen Technology and Latch go up and down completely randomly.

Pair Corralation between Aspen Technology and Latch

If you would invest  20,430  in Aspen Technology on December 4, 2024 and sell it today you would earn a total of  6,070  from holding Aspen Technology or generate 29.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Aspen Technology  vs.  Latch Inc

Aspen Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aspen Technology are ranked lower than 8 (%) 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.

Latch Inc

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Aspen Technology and Latch

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

The idea behind Aspen Technology and Latch Inc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.