Correlation Between ASPEN TECHINC and INDIKA ENERGY

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

Diversification Opportunities for ASPEN TECHINC and INDIKA ENERGY

-0.28

Correlation Coefficient

ASPEN TECHINC  INDIKA ENERGY

Very good diversification

The 3 months correlation between ASPEN and INDIKA is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding ASPEN TECHINC DL and INDIKA ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDIKA ENERGY 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 INDIKA ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDIKA ENERGY has no effect on the direction of ASPEN TECHINC i.e., ASPEN TECHINC and INDIKA ENERGY go up and down completely randomly.

Pair Corralation between ASPEN TECHINC and INDIKA ENERGY

Assuming the 90 days horizon ASPEN TECHINC DL is expected to generate 0.48 times more return on investment than INDIKA ENERGY. However, ASPEN TECHINC DL is 2.09 times less risky than INDIKA ENERGY. It trades about 0.04 of its potential returns per unit of risk. INDIKA ENERGY is currently generating about 0.01 per unit of risk. If you would invest  18,283  in ASPEN TECHINC DL on October 24, 2024 and sell it today you would earn a total of  5,917  from holding ASPEN TECHINC DL or generate 32.36% return on investment over 90 days.

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

ASPEN TECHINC DL  vs.  INDIKA ENERGY

ASPEN TECHINC DL

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ASPEN TECHINC DL are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ASPEN TECHINC reported solid returns over the last few months and may actually be approaching a breakup point.

INDIKA ENERGY

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in INDIKA ENERGY are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, INDIKA ENERGY is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ASPEN TECHINC and INDIKA ENERGY

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

The idea behind ASPEN TECHINC DL and INDIKA ENERGY 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.