Correlation Between Aspen Technology and S A P

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

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

Diversification Opportunities for Aspen Technology and S A P

0.72

Correlation Coefficient

Aspen Technology  S A P

Poor diversification

The 3 months correlation between Aspen and SAP is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Technology and SAP SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE ADR 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 S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE ADR has no effect on the direction of Aspen Technology i.e., Aspen Technology and S A P go up and down completely randomly.

Pair Corralation between Aspen Technology and S A P

Given the investment horizon of 90 days Aspen Technology is expected to generate 2.21 times less return on investment than S A P. But when comparing it to its historical volatility, Aspen Technology is 1.35 times less risky than S A P. It trades about 0.07 of its potential returns per unit of risk. SAP SE ADR is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  22,897  in SAP SE ADR on September 19, 2024 and sell it today you would earn a total of  2,200  from holding SAP SE ADR or generate 9.61% 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.  SAP SE ADR

Aspen Technology

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aspen Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Aspen Technology is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

SAP SE ADR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, S A P may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aspen Technology and S A P

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

The idea behind Aspen Technology and SAP SE ADR 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.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.