Correlation Between Azek and Aspen Aerogels
Can any of the company-specific risk be diversified away by investing in both Azek and Aspen Aerogels 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 Azek and Aspen Aerogels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Azek Company and Aspen Aerogels, you can compare the effects of market volatilities on Azek and Aspen Aerogels 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 Azek with a short position of Aspen Aerogels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Azek and Aspen Aerogels.
Diversification Opportunities for Azek and Aspen Aerogels
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Azek and Aspen is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Azek Company and Aspen Aerogels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Aerogels and Azek 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 Azek Company are associated (or correlated) with Aspen Aerogels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Aerogels has no effect on the direction of Azek i.e., Azek and Aspen Aerogels go up and down completely randomly.
Pair Corralation between Azek and Aspen Aerogels
Given the investment horizon of 90 days Azek is expected to generate 1.31 times less return on investment than Aspen Aerogels. But when comparing it to its historical volatility, Azek Company is 2.84 times less risky than Aspen Aerogels. It trades about 0.03 of its potential returns per unit of risk. Aspen Aerogels is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,718 in Aspen Aerogels on August 27, 2024 and sell it today you would lose (287.00) from holding Aspen Aerogels or give up 16.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Azek Company vs. Aspen Aerogels
Performance |
| Timeline |
| Azek Company |
| Aspen Aerogels |
Azek and Aspen Aerogels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Azek and Aspen Aerogels
The main advantage of trading using opposite Azek and Aspen Aerogels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Azek position performs unexpectedly, Aspen Aerogels 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 Aerogels will offset losses from the drop in Aspen Aerogels' long position.| Azek vs. Trex Company | Azek vs. Gibraltar Industries | Azek vs. Travis Perkins PLC | Azek vs. Janus International Group |
| Aspen Aerogels vs. Apyx Medical | Aspen Aerogels vs. Century Communities | Aspen Aerogels vs. Ardmore Shpng | Aspen Aerogels vs. American Assets Trust |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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