Correlation Between Aspen Insurance and American Copper

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

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

Diversification Opportunities for Aspen Insurance and American Copper

-0.36

Correlation Coefficient

Aspen Insurance  American Copper

Very good diversification

The 3 months correlation between Aspen and American is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Insurance Holdings and American Copper Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Copper Deve and Aspen Insurance 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 Insurance Holdings are associated (or correlated) with American Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Copper Deve has no effect on the direction of Aspen Insurance i.e., Aspen Insurance and American Copper go up and down completely randomly.

Pair Corralation between Aspen Insurance and American Copper

Assuming the 90 days trading horizon Aspen Insurance Holdings is expected to under-perform the American Copper. But the preferred stock apears to be less risky and, when comparing its historical volatility, Aspen Insurance Holdings is 175.89 times less risky than American Copper. The preferred stock trades about -0.11 of its potential returns per unit of risk. The American Copper Development is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  13.00  in American Copper Development on December 2, 2024 and sell it today you would earn a total of  3.00  from holding American Copper Development or generate 23.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Aspen Insurance Holdings  vs.  American Copper Development

Aspen Insurance Holdings

Risk-Adjusted Performance

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 latest weak performance, the Preferred Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

American Copper Deve

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Copper Development are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, American Copper reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aspen Insurance and American Copper

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

The idea behind Aspen Insurance Holdings and American Copper Development 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.