Correlation Between Aspen Technology and Telecom Italia

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

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

Diversification Opportunities for Aspen Technology and Telecom Italia

0.62

Correlation Coefficient

Aspen Technology  Telecom Italia

Poor diversification

The 3 months correlation between Aspen and Telecom is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Technology and Telecom Italia SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Italia SpA 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 Telecom Italia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecom Italia SpA has no effect on the direction of Aspen Technology i.e., Aspen Technology and Telecom Italia go up and down completely randomly.

Pair Corralation between Aspen Technology and Telecom Italia

If you would invest  17,616  in Aspen Technology on January 24, 2024 and sell it today you would earn a total of  2,092  from holding Aspen Technology or generate 11.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	0.54%
Values	Daily Returns

Aspen Technology  vs.  Telecom Italia SpA

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

Telecom Italia SpA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aspen Technology and Telecom Italia

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

The idea behind Aspen Technology and Telecom Italia SpA 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.