Correlation Between Aspen Technology and Rolls Royce

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

Diversification Opportunities for Aspen Technology and Rolls Royce

-0.3
  Correlation Coefficient

Very good diversification

The 3 months correlation between Aspen and Rolls is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Technology and Rolls Royce Grp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rolls Royce Grp 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 Rolls Royce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rolls Royce Grp has no effect on the direction of Aspen Technology i.e., Aspen Technology and Rolls Royce go up and down completely randomly.

Pair Corralation between Aspen Technology and Rolls Royce

Given the investment horizon of 90 days Aspen Technology is expected to generate 0.72 times more return on investment than Rolls Royce. However, Aspen Technology is 1.39 times less risky than Rolls Royce. It trades about 0.06 of its potential returns per unit of risk. Rolls Royce Grp is currently generating about -0.02 per unit of risk. If you would invest  13,058  in Aspen Technology on August 31, 2022 and sell it today you would earn a total of  8,844  from holding Aspen Technology or generate 67.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Aspen Technology  vs.  Rolls Royce Grp

 Performance (%) 
       Timeline  
Aspen Technology 
Aspen Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Aspen Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Aspen Technology is not utilizing all of its potentials. The new stock price mess, may contribute to short-term losses for the institutional investors.

Aspen Price Channel

Rolls Royce Grp 
Rolls Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Rolls Royce Grp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Rolls Royce showed solid returns over the last few months and may actually be approaching a breakup point.

Rolls Price Channel

Aspen Technology and Rolls Royce Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aspen Technology and Rolls Royce

The main advantage of trading using opposite Aspen Technology and Rolls Royce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aspen Technology position performs unexpectedly, Rolls Royce 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 Rolls Royce will offset losses from the drop in Rolls Royce's long position.
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The idea behind Aspen Technology and Rolls Royce Grp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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