Correlation Between Aspen Technology and Axcella Health

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Can any of the company-specific risk be diversified away by investing in both Aspen Technology and Axcella Health 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 Axcella Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aspen Technology and Axcella Health, you can compare the effects of market volatilities on Aspen Technology and Axcella Health 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 Axcella Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aspen Technology and Axcella Health.

Diversification Opportunities for Aspen Technology and Axcella Health

-0.46
  Correlation Coefficient

Very good diversification

The 3 months correlation between Aspen and Axcella is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Technology and Axcella Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axcella Health 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 Axcella Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axcella Health has no effect on the direction of Aspen Technology i.e., Aspen Technology and Axcella Health go up and down completely randomly.

Pair Corralation between Aspen Technology and Axcella Health

Given the investment horizon of 90 days Aspen Technology is expected to generate 0.35 times more return on investment than Axcella Health. However, Aspen Technology is 2.86 times less risky than Axcella Health. It trades about -0.07 of its potential returns per unit of risk. Axcella Health is currently generating about -0.18 per unit of risk. If you would invest  24,145  in Aspen Technology on August 31, 2022 and sell it today you would lose (1,068)  from holding Aspen Technology or give up 4.42% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Aspen Technology  vs.  Axcella Health

 Performance (%) 
       Timeline  
Aspen Technology 
Aspen Performance
5 of 100
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. Despite quite sluggish basic indicators, Aspen Technology may actually be approaching a critical reversion point that can send shares even higher in December 2022.

Aspen Price Channel

Axcella Health 
Axcella Performance
0 of 100
Over the last 90 days Axcella Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in December 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Axcella Price Channel

Aspen Technology and Axcella Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aspen Technology and Axcella Health

The main advantage of trading using opposite Aspen Technology and Axcella Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aspen Technology position performs unexpectedly, Axcella Health 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 Axcella Health will offset losses from the drop in Axcella Health's long position.
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The idea behind Aspen Technology and Axcella Health 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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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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