Correlation Between Progress Software and Aspen Technology

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

Diversification Opportunities for Progress Software and Aspen Technology

-0.19
  Correlation Coefficient

Good diversification

The 3 months correlation between Progress and Aspen is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Progress Software and Aspen Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Technology and Progress Software 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 Progress Software are associated (or correlated) with Aspen Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Technology has no effect on the direction of Progress Software i.e., Progress Software and Aspen Technology go up and down completely randomly.

Pair Corralation between Progress Software and Aspen Technology

Given the investment horizon of 90 days Progress Software is expected to under-perform the Aspen Technology. But the stock apears to be less risky and, when comparing its historical volatility, Progress Software is 3.54 times less risky than Aspen Technology. The stock trades about -0.07 of its potential returns per unit of risk. The Aspen Technology is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  19,754  in Aspen Technology on March 5, 2024 and sell it today you would earn a total of  1,311  from holding Aspen Technology or generate 6.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Progress Software  vs.  Aspen Technology

 Performance 
       Timeline  
Progress Software 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Progress Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Progress Software is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
Aspen Technology 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
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 weak basic indicators, Aspen Technology may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Progress Software and Aspen Technology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Progress Software and Aspen Technology

The main advantage of trading using opposite Progress Software and Aspen Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Progress Software position performs unexpectedly, Aspen Technology 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 Technology will offset losses from the drop in Aspen Technology's long position.
The idea behind Progress Software and Aspen Technology 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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