Correlation Between Aspen Insurance and Aegon NV

Can any of the company-specific risk be diversified away by investing in both Aspen Insurance and Aegon NV 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 Aegon NV 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 Aegon NV ADR, you can compare the effects of market volatilities on Aspen Insurance and Aegon NV 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 Aegon NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aspen Insurance and Aegon NV.

Diversification Opportunities for Aspen Insurance and Aegon NV

0.23

Correlation Coefficient

Aspen Insurance  Aegon NV

Modest diversification

The 3 months correlation between Aspen and Aegon is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Insurance Holdings and Aegon NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegon NV ADR 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 Aegon NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegon NV ADR has no effect on the direction of Aspen Insurance i.e., Aspen Insurance and Aegon NV go up and down completely randomly.

Pair Corralation between Aspen Insurance and Aegon NV

Assuming the 90 days trading horizon Aspen Insurance Holdings is expected to generate 0.31 times more return on investment than Aegon NV. However, Aspen Insurance Holdings is 3.2 times less risky than Aegon NV. It trades about -0.19 of its potential returns per unit of risk. Aegon NV ADR is currently generating about -0.07 per unit of risk. If you would invest  2,088  in Aspen Insurance Holdings on November 29, 2024 and sell it today you would lose (66.00) from holding Aspen Insurance Holdings or give up 3.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Aspen Insurance Holdings  vs.  Aegon NV ADR

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.

Aegon NV ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aegon NV ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Aegon NV is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Aspen Insurance and Aegon NV

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

The idea behind Aspen Insurance Holdings and Aegon NV ADR 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.