Correlation Between Skillful Craftsman and Aspen Insurance

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

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

Diversification Opportunities for Skillful Craftsman and Aspen Insurance

-0.11

Correlation Coefficient

Skillful Craftsman  Aspen Insurance

Good diversification

The 3 months correlation between Skillful and Aspen is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Skillful Craftsman Education 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 Skillful Craftsman 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 Skillful Craftsman Education 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 Skillful Craftsman i.e., Skillful Craftsman and Aspen Insurance go up and down completely randomly.

Pair Corralation between Skillful Craftsman and Aspen Insurance

Given the investment horizon of 90 days Skillful Craftsman Education is expected to generate 3.05 times more return on investment than Aspen Insurance. However, Skillful Craftsman is 3.05 times more volatile than Aspen Insurance Holdings. It trades about 0.02 of its potential returns per unit of risk. Aspen Insurance Holdings is currently generating about 0.01 per unit of risk. If you would invest  100.00  in Skillful Craftsman Education on December 30, 2024 and sell it today you would earn a total of  1.00  from holding Skillful Craftsman Education or generate 1.0% return on investment over 90 days.

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

Skillful Craftsman Education  vs.  Aspen Insurance Holdings

Skillful Craftsman

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Skillful Craftsman Education are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Skillful Craftsman is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Aspen Insurance Holdings

Risk-Adjusted Performance

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

Pair Trading with Skillful Craftsman and Aspen Insurance

The main advantage of trading using opposite Skillful Craftsman and Aspen Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skillful Craftsman 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 Skillful Craftsman Education 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.

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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.