Correlation Between W R and Aspen Insurance

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

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

Diversification Opportunities for W R and Aspen Insurance

0.48

Correlation Coefficient

W R  Aspen Insurance

Very weak diversification

The 3 months correlation between WRB-PE and Aspen is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding W R Berkley 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 W R 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 W R Berkley 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 W R i.e., W R and Aspen Insurance go up and down completely randomly.

Pair Corralation between W R and Aspen Insurance

Assuming the 90 days trading horizon W R Berkley is expected to generate 0.33 times more return on investment than Aspen Insurance. However, W R Berkley is 3.07 times less risky than Aspen Insurance. It trades about -0.02 of its potential returns per unit of risk. Aspen Insurance Holdings is currently generating about -0.08 per unit of risk. If you would invest  2,447  in W R Berkley on September 19, 2024 and sell it today you would lose (7.00) from holding W R Berkley or give up 0.29% of portfolio value over 90 days.

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

W R Berkley  vs.  Aspen Insurance Holdings

W R Berkley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days W R Berkley has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, W R is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 W R and Aspen Insurance

The main advantage of trading using opposite W R and Aspen Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if W R 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 W R Berkley 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.