Correlation Between ASPEN TECHINC and COMMERCIAL VEHICLE

Can any of the company-specific risk be diversified away by investing in both ASPEN TECHINC and COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE, you can compare the effects of market volatilities on ASPEN TECHINC and COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASPEN TECHINC and COMMERCIAL VEHICLE.

Diversification Opportunities for ASPEN TECHINC and COMMERCIAL VEHICLE

-0.39

Correlation Coefficient

ASPEN TECHINC  COMMERCIAL VEHICLE

Very good diversification

The 3 months correlation between ASPEN and COMMERCIAL is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding ASPEN TECHINC DL and COMMERCIAL VEHICLE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMMERCIAL VEHICLE has no effect on the direction of ASPEN TECHINC i.e., ASPEN TECHINC and COMMERCIAL VEHICLE go up and down completely randomly.

Pair Corralation between ASPEN TECHINC and COMMERCIAL VEHICLE

Assuming the 90 days horizon ASPEN TECHINC DL is expected to generate 0.29 times more return on investment than COMMERCIAL VEHICLE. However, ASPEN TECHINC DL is 3.41 times less risky than COMMERCIAL VEHICLE. It trades about 0.03 of its potential returns per unit of risk. COMMERCIAL VEHICLE is currently generating about -0.16 per unit of risk. If you would invest  23,600  in ASPEN TECHINC DL on December 22, 2024 and sell it today you would earn a total of  400.00  from holding ASPEN TECHINC DL or generate 1.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

ASPEN TECHINC DL  vs.  COMMERCIAL VEHICLE

ASPEN TECHINC DL

Risk-Adjusted Performance

Weak

Over the last 90 days ASPEN TECHINC DL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ASPEN TECHINC is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

COMMERCIAL VEHICLE

Risk-Adjusted Performance

Very Weak

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

Pair Trading with ASPEN TECHINC and COMMERCIAL VEHICLE

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

The idea behind ASPEN TECHINC DL and COMMERCIAL VEHICLE 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.