Correlation Between Aspen Insurance and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both Aspen Insurance and Iridium Communications 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 Iridium Communications 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 Iridium Communications, you can compare the effects of market volatilities on Aspen Insurance and Iridium Communications 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 Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aspen Insurance and Iridium Communications.
Diversification Opportunities for Aspen Insurance and Iridium Communications
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Aspen and Iridium is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Insurance Holdings and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications 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 Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of Aspen Insurance i.e., Aspen Insurance and Iridium Communications go up and down completely randomly.
Pair Corralation between Aspen Insurance and Iridium Communications
Assuming the 90 days trading horizon Aspen Insurance Holdings is expected to under-perform the Iridium Communications. But the preferred stock apears to be less risky and, when comparing its historical volatility, Aspen Insurance Holdings is 1.73 times less risky than Iridium Communications. The preferred stock trades about -0.22 of its potential returns per unit of risk. The Iridium Communications is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 2,985 in Iridium Communications on September 24, 2024 and sell it today you would lose (63.00) from holding Iridium Communications or give up 2.11% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 95.24% |
Values | Daily Returns |
Aspen Insurance Holdings vs. Iridium Communications
Performance |
Timeline |
Aspen Insurance Holdings |
Iridium Communications |
Aspen Insurance and Iridium Communications Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Aspen Insurance and Iridium Communications
The main advantage of trading using opposite Aspen Insurance and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aspen Insurance position performs unexpectedly, Iridium Communications 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 Iridium Communications will offset losses from the drop in Iridium Communications' long position.Aspen Insurance vs. Aspen Insurance Holdings | Aspen Insurance vs. Selective Insurance Group | Aspen Insurance vs. The Allstate | Aspen Insurance vs. AmTrust Financial Services |
Iridium Communications vs. IHS Holding | Iridium Communications vs. Cogent Communications Group | Iridium Communications vs. IDT Corporation | Iridium Communications vs. Cable One |
Check out your portfolio center.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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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