Correlation Between Aspen Insurance and BCE

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

Diversification Opportunities for Aspen Insurance and BCE

0.3

Correlation Coefficient

Aspen Insurance  BCE

Weak diversification

The 3 months correlation between Aspen and BCE is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Insurance Holdings and BCE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc 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 BCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCE Inc has no effect on the direction of Aspen Insurance i.e., Aspen Insurance and BCE go up and down completely randomly.

Pair Corralation between Aspen Insurance and BCE

Assuming the 90 days trading horizon Aspen Insurance Holdings is expected to generate 0.73 times more return on investment than BCE. However, Aspen Insurance Holdings is 1.37 times less risky than BCE. It trades about -0.26 of its potential returns per unit of risk. BCE Inc is currently generating about -0.3 per unit of risk. If you would invest  2,125  in Aspen Insurance Holdings on October 13, 2024 and sell it today you would lose (117.00) from holding Aspen Insurance Holdings or give up 5.51% of portfolio value over 90 days.

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

Aspen Insurance Holdings  vs.  BCE Inc

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 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.

BCE Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCE Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Aspen Insurance and BCE

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

The idea behind Aspen Insurance Holdings and BCE Inc 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 CEOs Directory module to screen CEOs from public companies around the world.