Correlation Between Aspen Technology and Alarm Holdings
Can any of the company-specific risk be diversified away by investing in both Aspen Technology and Alarm Holdings 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 Alarm Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aspen Technology and Alarm Holdings, you can compare the effects of market volatilities on Aspen Technology and Alarm Holdings 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 Alarm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aspen Technology and Alarm Holdings.
Diversification Opportunities for Aspen Technology and Alarm Holdings
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Aspen and Alarm is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Technology and Alarm Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alarm Holdings 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 Alarm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alarm Holdings has no effect on the direction of Aspen Technology i.e., Aspen Technology and Alarm Holdings go up and down completely randomly.
Pair Corralation between Aspen Technology and Alarm Holdings
Given the investment horizon of 90 days Aspen Technology is expected to generate 0.82 times more return on investment than Alarm Holdings. However, Aspen Technology is 1.21 times less risky than Alarm Holdings. It trades about 0.24 of its potential returns per unit of risk. Alarm Holdings is currently generating about 0.14 per unit of risk. If you would invest 25,290 in Aspen Technology on November 7, 2024 and sell it today you would earn a total of 1,107 from holding Aspen Technology or generate 4.38% 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. Alarm Holdings
Performance |
| Timeline |
| Aspen Technology |
| Alarm Holdings |
Aspen Technology and Alarm Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aspen Technology and Alarm Holdings
The main advantage of trading using opposite Aspen Technology and Alarm Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aspen Technology position performs unexpectedly, Alarm Holdings 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 Alarm Holdings will offset losses from the drop in Alarm Holdings' long position.| Aspen Technology vs. Bentley Systems | Aspen Technology vs. Tyler Technologies | Aspen Technology vs. Blackbaud | Aspen Technology vs. SSC Technologies Holdings |
| Alarm Holdings vs. Paycor HCM | Alarm Holdings vs. Appfolio | Alarm Holdings vs. Agilysys | Alarm Holdings vs. Alkami Technology |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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