Correlation Between Equitable Holdings and Aspen Insurance

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

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

Diversification Opportunities for Equitable Holdings and Aspen Insurance

0.75

Correlation Coefficient

Equitable Holdings  Aspen Insurance

Poor diversification

The 3 months correlation between Equitable and Aspen is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Equitable Holdings 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 Equitable Holdings 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 Equitable Holdings 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 Equitable Holdings i.e., Equitable Holdings and Aspen Insurance go up and down completely randomly.

Pair Corralation between Equitable Holdings and Aspen Insurance

Assuming the 90 days trading horizon Equitable Holdings is expected to generate 3.0 times less return on investment than Aspen Insurance. But when comparing it to its historical volatility, Equitable Holdings is 1.13 times less risky than Aspen Insurance. It trades about 0.03 of its potential returns per unit of risk. Aspen Insurance Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,897  in Aspen Insurance Holdings on December 30, 2024 and sell it today you would earn a total of  93.00  from holding Aspen Insurance Holdings or generate 4.9% return on investment over 90 days.

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

Equitable Holdings  vs.  Aspen Insurance Holdings

Equitable Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Equitable Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, Equitable Holdings is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Aspen Insurance Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aspen Insurance Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Equitable Holdings and Aspen Insurance

The main advantage of trading using opposite Equitable Holdings and Aspen Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equitable Holdings 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 Equitable Holdings 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.