Correlation Between Aspen Insurance and National Vision

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

Diversification Opportunities for Aspen Insurance and National Vision

-0.05

Correlation Coefficient

Aspen Insurance  National Vision

Good diversification

The 3 months correlation between Aspen and National is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Insurance Holdings and National Vision Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Vision Holdings 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 National Vision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Vision Holdings has no effect on the direction of Aspen Insurance i.e., Aspen Insurance and National Vision go up and down completely randomly.

Pair Corralation between Aspen Insurance and National Vision

Assuming the 90 days trading horizon Aspen Insurance is expected to generate 10.14 times less return on investment than National Vision. But when comparing it to its historical volatility, Aspen Insurance Holdings is 3.04 times less risky than National Vision. It trades about 0.04 of its potential returns per unit of risk. National Vision Holdings is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,057  in National Vision Holdings on December 26, 2024 and sell it today you would earn a total of  279.00  from holding National Vision Holdings or generate 26.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Aspen Insurance Holdings  vs.  National Vision Holdings

Aspen Insurance Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aspen Insurance Holdings are ranked lower than 3 (%) 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.

National Vision Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Vision Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, National Vision exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aspen Insurance and National Vision

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

The idea behind Aspen Insurance Holdings and National Vision 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.