Correlation Between ASPEN TECHINC and BII Railway

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

By analyzing existing cross correlation between ASPEN TECHINC DL and BII Railway Transportation, you can compare the effects of market volatilities on ASPEN TECHINC and BII Railway 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 TECHINC with a short position of BII Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASPEN TECHINC and BII Railway.

Diversification Opportunities for ASPEN TECHINC and BII Railway

-0.57

Correlation Coefficient

ASPEN TECHINC  BII Railway

Excellent diversification

The 3 months correlation between ASPEN and BII is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding ASPEN TECHINC DL and BII Railway Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BII Railway Transpor and ASPEN TECHINC 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 TECHINC DL are associated (or correlated) with BII Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BII Railway Transpor has no effect on the direction of ASPEN TECHINC i.e., ASPEN TECHINC and BII Railway go up and down completely randomly.

Pair Corralation between ASPEN TECHINC and BII Railway

Assuming the 90 days horizon ASPEN TECHINC DL is expected to generate 0.63 times more return on investment than BII Railway. However, ASPEN TECHINC DL is 1.59 times less risky than BII Railway. It trades about 0.04 of its potential returns per unit of risk. BII Railway Transportation is currently generating about 0.01 per unit of risk. If you would invest  17,371  in ASPEN TECHINC DL on October 11, 2024 and sell it today you would earn a total of  6,629  from holding ASPEN TECHINC DL or generate 38.16% return on investment over 90 days.

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

ASPEN TECHINC DL  vs.  BII Railway Transportation

ASPEN TECHINC DL

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ASPEN TECHINC DL are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ASPEN TECHINC reported solid returns over the last few months and may actually be approaching a breakup point.

BII Railway Transpor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BII Railway Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with ASPEN TECHINC and BII Railway

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

The idea behind ASPEN TECHINC DL and BII Railway Transportation 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.