Correlation Between NET Power and Aspen Aerogels

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

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

Diversification Opportunities for NET Power and Aspen Aerogels

0.42

Correlation Coefficient

NET Power  Aspen Aerogels

Very weak diversification

The 3 months correlation between NET and Aspen is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding NET Power and Aspen Aerogels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Aerogels and NET Power 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 NET Power 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 NET Power i.e., NET Power and Aspen Aerogels go up and down completely randomly.

Pair Corralation between NET Power and Aspen Aerogels

Given the investment horizon of 90 days NET Power is expected to generate 2.25 times more return on investment than Aspen Aerogels. However, NET Power is 2.25 times more volatile than Aspen Aerogels. It trades about 0.1 of its potential returns per unit of risk. Aspen Aerogels is currently generating about 0.12 per unit of risk. If you would invest  193.00  in NET Power on May 13, 2025 and sell it today you would earn a total of  76.00  from holding NET Power or generate 39.38% return on investment over 90 days.

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

NET Power  vs.  Aspen Aerogels

NET Power

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in NET Power are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, NET Power reported solid returns over the last few months and may actually be approaching a breakup point.

Aspen Aerogels

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aspen Aerogels are ranked lower than 9 (%) 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 NET Power and Aspen Aerogels

The main advantage of trading using opposite NET Power and Aspen Aerogels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NET Power 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 NET Power 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.