Correlation Between Aspen Technology and Hong Kong

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

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

Diversification Opportunities for Aspen Technology and Hong Kong

0.49

Correlation Coefficient

Aspen Technology  Hong Kong

Very weak diversification

The 3 months correlation between Aspen and Hong is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Technology and Hong Kong and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Kong 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 Hong Kong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hong Kong has no effect on the direction of Aspen Technology i.e., Aspen Technology and Hong Kong go up and down completely randomly.

Pair Corralation between Aspen Technology and Hong Kong

Given the investment horizon of 90 days Aspen Technology is expected to generate 1.0 times more return on investment than Hong Kong. However, Aspen Technology is 1.0 times less risky than Hong Kong. It trades about 0.15 of its potential returns per unit of risk. Hong Kong and is currently generating about 0.12 per unit of risk. If you would invest  17,536  in Aspen Technology on January 21, 2024 and sell it today you would earn a total of  2,311  from holding Aspen Technology or generate 13.18% 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.  Hong Kong and

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 latest stock price disarray, may contribute to short-term losses for the investors.

Hong Kong

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aspen Technology and Hong Kong

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

The idea behind Aspen Technology and Hong Kong and 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.