Correlation Between Cass Information and Aspen Technology

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

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

Diversification Opportunities for Cass Information and Aspen Technology

0.05

Correlation Coefficient

Cass Information  Aspen Technology

Significant diversification

The 3 months correlation between Cass and Aspen is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Cass Information Systems and Aspen Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Technology and Cass Information 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 Cass Information Systems are associated (or correlated) with Aspen Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Technology has no effect on the direction of Cass Information i.e., Cass Information and Aspen Technology go up and down completely randomly.

Pair Corralation between Cass Information and Aspen Technology

Given the investment horizon of 90 days Cass Information Systems is expected to under-perform the Aspen Technology. But the stock apears to be less risky and, when comparing its historical volatility, Cass Information Systems is 1.07 times less risky than Aspen Technology. The stock trades about -0.1 of its potential returns per unit of risk. The Aspen Technology is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  19,980  in Aspen Technology on January 19, 2024 and sell it today you would lose (232.00) from holding Aspen Technology or give up 1.16% of portfolio value over 90 days.

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

Cass Information Systems  vs.  Aspen Technology

Cass Information Systems

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cass Information Systems are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Cass Information may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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.

Pair Trading with Cass Information and Aspen Technology

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

The idea behind Cass Information Systems and Aspen Technology 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.