Correlation Between Aspen Insurance and Afya

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

Diversification Opportunities for Aspen Insurance and Afya

-0.12

Correlation Coefficient

Aspen Insurance  Afya

Good diversification

The 3 months correlation between Aspen and Afya is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Insurance Holdings and Afya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afya 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 Afya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afya has no effect on the direction of Aspen Insurance i.e., Aspen Insurance and Afya go up and down completely randomly.

Pair Corralation between Aspen Insurance and Afya

Assuming the 90 days trading horizon Aspen Insurance is expected to generate 8.52 times less return on investment than Afya. But when comparing it to its historical volatility, Aspen Insurance Holdings is 2.44 times less risky than Afya. It trades about 0.03 of its potential returns per unit of risk. Afya is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,558  in Afya on December 28, 2024 and sell it today you would earn a total of  242.00  from holding Afya or generate 15.53% return on investment over 90 days.

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

Aspen Insurance Holdings  vs.  Afya

Aspen Insurance Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aspen Insurance Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Afya

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Afya are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Afya sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aspen Insurance and Afya

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

The idea behind Aspen Insurance Holdings and Afya 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.