Correlation Between Century Communities and Aspen Aerogels

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

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

Diversification Opportunities for Century Communities and Aspen Aerogels

0.89

Correlation Coefficient

Century Communities  Aspen Aerogels

Very poor diversification

The 3 months correlation between Century and Aspen is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Century Communities and Aspen Aerogels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Aerogels and Century Communities 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 Century Communities 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 Century Communities i.e., Century Communities and Aspen Aerogels go up and down completely randomly.

Pair Corralation between Century Communities and Aspen Aerogels

Considering the 90-day investment horizon Century Communities is expected to generate 0.48 times more return on investment than Aspen Aerogels. However, Century Communities is 2.06 times less risky than Aspen Aerogels. It trades about -0.23 of its potential returns per unit of risk. Aspen Aerogels is currently generating about -0.26 per unit of risk. If you would invest  10,269  in Century Communities on September 30, 2024 and sell it today you would lose (2,910) from holding Century Communities or give up 28.34% of portfolio value over 90 days.

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

Century Communities  vs.  Aspen Aerogels

Century Communities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Century Communities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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

Pair Trading with Century Communities and Aspen Aerogels

The main advantage of trading using opposite Century Communities and Aspen Aerogels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Communities 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 Century Communities 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.

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..