Correlation Between Global Indemnity and Aspen Insurance

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

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

Diversification Opportunities for Global Indemnity and Aspen Insurance

-0.3

Correlation Coefficient

Global Indemnity  Aspen Insurance

Very good diversification

The 3 months correlation between Global and Aspen is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Global Indemnity PLC 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 Global Indemnity 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 Global Indemnity PLC 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 Global Indemnity i.e., Global Indemnity and Aspen Insurance go up and down completely randomly.

Pair Corralation between Global Indemnity and Aspen Insurance

Given the investment horizon of 90 days Global Indemnity PLC is expected to generate 0.83 times more return on investment than Aspen Insurance. However, Global Indemnity PLC is 1.21 times less risky than Aspen Insurance. It trades about 0.17 of its potential returns per unit of risk. Aspen Insurance Holdings is currently generating about -0.06 per unit of risk. If you would invest  3,215  in Global Indemnity PLC on September 20, 2024 and sell it today you would earn a total of  389.00  from holding Global Indemnity PLC or generate 12.1% return on investment over 90 days.

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

Global Indemnity PLC  vs.  Aspen Insurance Holdings

Global Indemnity PLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Indemnity PLC are ranked lower than 13 (%) 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.

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.

Pair Trading with Global Indemnity and Aspen Insurance

The main advantage of trading using opposite Global Indemnity and Aspen Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Indemnity 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 Global Indemnity PLC 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.