Correlation Between Canada Goose and Aspen Aerogels

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

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

Diversification Opportunities for Canada Goose and Aspen Aerogels

0.17

Correlation Coefficient

Canada Goose  Aspen Aerogels

Average diversification

The 3 months correlation between Canada and Aspen is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Canada Goose Holdings and Aspen Aerogels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Aerogels and Canada Goose 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 Canada Goose Holdings are associated (or correlated) with Aspen Aerogels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Aerogels has no effect on the direction of Canada Goose i.e., Canada Goose and Aspen Aerogels go up and down completely randomly.

Pair Corralation between Canada Goose and Aspen Aerogels

Given the investment horizon of 90 days Canada Goose Holdings is expected to under-perform the Aspen Aerogels. But the stock apears to be less risky and, when comparing its historical volatility, Canada Goose Holdings is 1.6 times less risky than Aspen Aerogels. The stock trades about -0.18 of its potential returns per unit of risk. The Aspen Aerogels is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,763  in Aspen Aerogels on January 31, 2024 and sell it today you would lose (96.00) from holding Aspen Aerogels or give up 5.45% of portfolio value over 90 days.

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

Canada Goose Holdings  vs.  Aspen Aerogels

Canada Goose Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canada Goose Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Canada Goose is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Aspen Aerogels

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aspen Aerogels are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Aspen Aerogels displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canada Goose and Aspen Aerogels

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

The idea behind Canada Goose Holdings and Aspen Aerogels 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.