Correlation Between ASPEN TECHINC and US FOODS

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

Diversification Opportunities for ASPEN TECHINC and US FOODS

0.31

Correlation Coefficient

ASPEN TECHINC  US FOODS

Weak diversification

The 3 months correlation between ASPEN and UFH is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding ASPEN TECHINC DL and US FOODS HOLDING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US FOODS HOLDING 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 US FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US FOODS HOLDING has no effect on the direction of ASPEN TECHINC i.e., ASPEN TECHINC and US FOODS go up and down completely randomly.

Pair Corralation between ASPEN TECHINC and US FOODS

Assuming the 90 days horizon ASPEN TECHINC DL is expected to generate 0.79 times more return on investment than US FOODS. However, ASPEN TECHINC DL is 1.26 times less risky than US FOODS. It trades about 0.03 of its potential returns per unit of risk. US FOODS HOLDING is currently generating about -0.1 per unit of risk. If you would invest  23,600  in ASPEN TECHINC DL on December 20, 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 Together
Strength	Very Weak
Accuracy	93.22%
Values	Daily Returns

ASPEN TECHINC DL  vs.  US FOODS HOLDING

ASPEN TECHINC DL

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ASPEN TECHINC DL are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ASPEN TECHINC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

US FOODS HOLDING

Risk-Adjusted Performance

Very Weak

Over the last 90 days US FOODS HOLDING has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with ASPEN TECHINC and US FOODS

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

The idea behind ASPEN TECHINC DL and US FOODS HOLDING 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.