Correlation Between American Financial and Aspen Insurance

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

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

Diversification Opportunities for American Financial and Aspen Insurance

-0.75

Correlation Coefficient

American Financial  Aspen Insurance

Pay attention - limited upside

The 3 months correlation between American and Aspen is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding American Financial Group and Aspen Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Insurance Holdings and American Financial 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 American Financial Group are associated (or correlated) with Aspen Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Insurance Holdings has no effect on the direction of American Financial i.e., American Financial and Aspen Insurance go up and down completely randomly.

Pair Corralation between American Financial and Aspen Insurance

Considering the 90-day investment horizon American Financial Group is expected to generate 2.46 times more return on investment than Aspen Insurance. However, American Financial is 2.46 times more volatile than Aspen Insurance Holdings. It trades about -0.01 of its potential returns per unit of risk. Aspen Insurance Holdings is currently generating about -0.29 per unit of risk. If you would invest  13,974  in American Financial Group on September 14, 2024 and sell it today you would lose (69.00) from holding American Financial Group or give up 0.49% of portfolio value over 90 days.

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

American Financial Group  vs.  Aspen Insurance Holdings

American Financial

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Financial Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, American Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Aspen Insurance Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aspen Insurance Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Aspen Insurance is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with American Financial and Aspen Insurance

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

The idea behind American Financial Group and Aspen Insurance Holdings 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.