Correlation Between Aspen Technology and Alkami Technology

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

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

Diversification Opportunities for Aspen Technology and Alkami Technology

0.73

Correlation Coefficient

Aspen Technology  Alkami Technology

Poor diversification

The 3 months correlation between Aspen and Alkami is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Technology and Alkami Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alkami Technology 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 Alkami Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alkami Technology has no effect on the direction of Aspen Technology i.e., Aspen Technology and Alkami Technology go up and down completely randomly.

Pair Corralation between Aspen Technology and Alkami Technology

Given the investment horizon of 90 days Aspen Technology is expected to generate 2.18 times less return on investment than Alkami Technology. But when comparing it to its historical volatility, Aspen Technology is 2.23 times less risky than Alkami Technology. It trades about 0.15 of its potential returns per unit of risk. Alkami Technology is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,171  in Alkami Technology on September 1, 2024 and sell it today you would earn a total of  776.00  from holding Alkami Technology or generate 24.47% return on investment over 90 days.

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

Aspen Technology  vs.  Alkami Technology

Aspen Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aspen Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Aspen Technology may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Alkami Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alkami Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, Alkami Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aspen Technology and Alkami Technology

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

The idea behind Aspen Technology and Alkami 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.