Correlation Between Aspen Insurance and Global Indemnity

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

Diversification Opportunities for Aspen Insurance and Global Indemnity

-0.26

Correlation Coefficient

Aspen Insurance  Global Indemnity

Very good diversification

The 3 months correlation between Aspen and Global is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Insurance Holdings and Global Indemnity PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Indemnity PLC 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 Global Indemnity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Indemnity PLC has no effect on the direction of Aspen Insurance i.e., Aspen Insurance and Global Indemnity go up and down completely randomly.

Pair Corralation between Aspen Insurance and Global Indemnity

Assuming the 90 days trading horizon Aspen Insurance is expected to generate 248.08 times less return on investment than Global Indemnity. But when comparing it to its historical volatility, Aspen Insurance Holdings is 78.27 times less risky than Global Indemnity. It trades about 0.03 of its potential returns per unit of risk. Global Indemnity PLC is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,017  in Global Indemnity PLC on September 19, 2024 and sell it today you would earn a total of  608.00  from holding Global Indemnity PLC or generate 20.15% 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.  Global Indemnity PLC

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 rather sound essential indicators, Aspen Insurance is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Global Indemnity PLC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Indemnity PLC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak essential indicators, Global Indemnity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aspen Insurance and Global Indemnity

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

The idea behind Aspen Insurance Holdings and Global Indemnity PLC 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.