Correlation Between Chubb and Aspen Insurance

Can any of the company-specific risk be diversified away by investing in both Chubb and Aspen Insurance 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 Chubb and Aspen Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chubb and Aspen Insurance Holdings, you can compare the effects of market volatilities on Chubb and Aspen Insurance 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 Chubb with a short position of Aspen Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chubb and Aspen Insurance.

Diversification Opportunities for Chubb and Aspen Insurance

0.23

Correlation Coefficient

Chubb  Aspen Insurance

Modest diversification

The 3 months correlation between Chubb and Aspen is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Chubb and Aspen Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Insurance Holdings and Chubb 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 Chubb are associated (or correlated) with Aspen Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Insurance Holdings has no effect on the direction of Chubb i.e., Chubb and Aspen Insurance go up and down completely randomly.

Pair Corralation between Chubb and Aspen Insurance

Allowing for the 90-day total investment horizon Chubb is expected to generate 2.36 times more return on investment than Aspen Insurance. However, Chubb is 2.36 times more volatile than Aspen Insurance Holdings. It trades about 0.09 of its potential returns per unit of risk. Aspen Insurance Holdings is currently generating about 0.07 per unit of risk. If you would invest  21,915  in Chubb on September 19, 2024 and sell it today you would earn a total of  5,754  from holding Chubb or generate 26.26% return on investment over 90 days.

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

Chubb  vs.  Aspen Insurance Holdings

Chubb

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chubb has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Chubb is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Chubb and Aspen Insurance

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

The idea behind Chubb and Aspen Insurance 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.