Correlation Between Aspen Technology and Model N

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

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

Diversification Opportunities for Aspen Technology and Model N

0.64

Correlation Coefficient

Aspen Technology  Model N

Poor diversification

The 3 months correlation between Aspen and Model is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Technology and Model N in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Model N 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 Model N. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Model N has no effect on the direction of Aspen Technology i.e., Aspen Technology and Model N go up and down completely randomly.

Pair Corralation between Aspen Technology and Model N

If you would invest  22,487  in Aspen Technology on September 2, 2024 and sell it today you would earn a total of  2,513  from holding Aspen Technology or generate 11.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Aspen Technology  vs.  Model N

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 January 2025.

Model N

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Model N has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Model N is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aspen Technology and Model N

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

The idea behind Aspen Technology and Model N 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.