Correlation Between Aspen Technology and MondayCom

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

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

Diversification Opportunities for Aspen Technology and MondayCom

0.26

Correlation Coefficient

Aspen Technology  MondayCom

Modest diversification

The 3 months correlation between Aspen and MondayCom is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Technology and MondayCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MondayCom 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 MondayCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MondayCom has no effect on the direction of Aspen Technology i.e., Aspen Technology and MondayCom go up and down completely randomly.

Pair Corralation between Aspen Technology and MondayCom

Given the investment horizon of 90 days Aspen Technology is expected to generate 1.5 times less return on investment than MondayCom. But when comparing it to its historical volatility, Aspen Technology is 5.26 times less risky than MondayCom. It trades about 0.14 of its potential returns per unit of risk. MondayCom is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  23,529  in MondayCom on December 28, 2024 and sell it today you would earn a total of  1,172  from holding MondayCom or generate 4.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	81.97%
Values	Daily Returns

Aspen Technology  vs.  MondayCom

Aspen Technology

Risk-Adjusted Performance

OK

Over the last 90 days Aspen Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, Aspen Technology may actually be approaching a critical reversion point that can send shares even higher in April 2025.

MondayCom

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MondayCom are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting fundamental indicators, MondayCom may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Aspen Technology and MondayCom

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

The idea behind Aspen Technology and MondayCom 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.