Correlation Between Aspen Technology and Gabelli Equity

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

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

Diversification Opportunities for Aspen Technology and Gabelli Equity

0.34

Correlation Coefficient

Aspen Technology  Gabelli Equity

Weak diversification

The 3 months correlation between Aspen and Gabelli is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Technology and Gabelli Equity Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Equity Trust and Aspen Technology 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 Technology are associated (or correlated) with Gabelli Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Equity Trust has no effect on the direction of Aspen Technology i.e., Aspen Technology and Gabelli Equity go up and down completely randomly.

Pair Corralation between Aspen Technology and Gabelli Equity

Given the investment horizon of 90 days Aspen Technology is expected to generate 2.04 times more return on investment than Gabelli Equity. However, Aspen Technology is 2.04 times more volatile than Gabelli Equity Trust. It trades about -0.05 of its potential returns per unit of risk. Gabelli Equity Trust is currently generating about -0.17 per unit of risk. If you would invest  20,184  in Aspen Technology on January 26, 2024 and sell it today you would lose (473.00) from holding Aspen Technology or give up 2.34% of portfolio value over 90 days.

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

Aspen Technology  vs.  Gabelli Equity Trust

Aspen Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aspen Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Aspen Technology is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Gabelli Equity Trust

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gabelli Equity Trust are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat uncertain basic indicators, Gabelli Equity may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Aspen Technology and Gabelli Equity

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

The idea behind Aspen Technology and Gabelli Equity Trust 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.