Correlation Between Aspen Technology and GATX

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

By analyzing existing cross correlation between Aspen Technology and GATX Corporation, you can compare the effects of market volatilities on Aspen Technology and GATX 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 GATX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aspen Technology and GATX.

Diversification Opportunities for Aspen Technology and GATX

0.5

Correlation Coefficient

Aspen Technology  GATX

Very weak diversification

The 3 months correlation between Aspen and GATX is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Technology and GATX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GATX 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 GATX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GATX has no effect on the direction of Aspen Technology i.e., Aspen Technology and GATX go up and down completely randomly.

Pair Corralation between Aspen Technology and GATX

Given the investment horizon of 90 days Aspen Technology is expected to generate 1.89 times more return on investment than GATX. However, Aspen Technology is 1.89 times more volatile than GATX Corporation. It trades about 0.08 of its potential returns per unit of risk. GATX Corporation is currently generating about 0.02 per unit of risk. If you would invest  18,662  in Aspen Technology on January 25, 2024 and sell it today you would earn a total of  1,157  from holding Aspen Technology or generate 6.2% return on investment over 90 days.

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

Aspen Technology  vs.  GATX Corp.

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.

GATX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GATX Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, GATX is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aspen Technology and GATX

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

The idea behind Aspen Technology and GATX Corporation 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..