Correlation Between RLI Corp and Aspen Insurance

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

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

Diversification Opportunities for RLI Corp and Aspen Insurance

-0.69

Correlation Coefficient

RLI Corp  Aspen Insurance

Excellent diversification

The 3 months correlation between RLI and Aspen is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding RLI Corp 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 RLI Corp 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 RLI Corp 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 RLI Corp i.e., RLI Corp and Aspen Insurance go up and down completely randomly.

Pair Corralation between RLI Corp and Aspen Insurance

Considering the 90-day investment horizon RLI Corp is expected to generate 2.25 times more return on investment than Aspen Insurance. However, RLI Corp is 2.25 times more volatile than Aspen Insurance Holdings. It trades about 0.13 of its potential returns per unit of risk. Aspen Insurance Holdings is currently generating about 0.02 per unit of risk. If you would invest  13,790  in RLI Corp on September 19, 2024 and sell it today you would earn a total of  2,898  from holding RLI Corp or generate 21.02% return on investment over 90 days.

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

RLI Corp  vs.  Aspen Insurance Holdings

RLI Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RLI Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak essential indicators, RLI Corp 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with RLI Corp and Aspen Insurance

The main advantage of trading using opposite RLI Corp and Aspen Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLI Corp 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 RLI Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.