Correlation Between Aspen Insurance and Universal Display

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

Diversification Opportunities for Aspen Insurance and Universal Display

0.14

Correlation Coefficient

Aspen Insurance  Universal Display

Average diversification

The 3 months correlation between Aspen and Universal is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Insurance Holdings and Universal Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Display 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 Universal Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Display has no effect on the direction of Aspen Insurance i.e., Aspen Insurance and Universal Display go up and down completely randomly.

Pair Corralation between Aspen Insurance and Universal Display

Assuming the 90 days trading horizon Aspen Insurance Holdings is expected to generate 0.52 times more return on investment than Universal Display. However, Aspen Insurance Holdings is 1.93 times less risky than Universal Display. It trades about 0.09 of its potential returns per unit of risk. Universal Display is currently generating about -0.05 per unit of risk. If you would invest  2,068  in Aspen Insurance Holdings on September 1, 2024 and sell it today you would earn a total of  140.00  from holding Aspen Insurance Holdings or generate 6.77% return on investment over 90 days.

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

Aspen Insurance Holdings  vs.  Universal Display

Aspen Insurance Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aspen Insurance Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Aspen Insurance may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Universal Display

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Display has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Aspen Insurance and Universal Display

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

The idea behind Aspen Insurance Holdings and Universal Display 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.