Correlation Between Aspen Insurance and Albertsons Companies

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

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

Diversification Opportunities for Aspen Insurance and Albertsons Companies

0.27

Correlation Coefficient

Aspen Insurance  Albertsons Companies

Modest diversification

The 3 months correlation between Aspen and Albertsons is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Insurance Holdings and Albertsons Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albertsons Companies and Aspen Insurance 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 Aspen Insurance Holdings are associated (or correlated) with Albertsons Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albertsons Companies has no effect on the direction of Aspen Insurance i.e., Aspen Insurance and Albertsons Companies go up and down completely randomly.

Pair Corralation between Aspen Insurance and Albertsons Companies

Assuming the 90 days trading horizon Aspen Insurance Holdings is expected to generate 1.02 times more return on investment than Albertsons Companies. However, Aspen Insurance is 1.02 times more volatile than Albertsons Companies. It trades about 0.01 of its potential returns per unit of risk. Albertsons Companies is currently generating about -0.04 per unit of risk. If you would invest  2,180  in Aspen Insurance Holdings on September 13, 2024 and sell it today you would earn a total of  2.00  from holding Aspen Insurance Holdings or generate 0.09% return on investment over 90 days.

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

Aspen Insurance Holdings  vs.  Albertsons Companies

Aspen Insurance Holdings

Risk-Adjusted Performance

0 of 100

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.

Albertsons Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Albertsons Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Albertsons Companies is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Aspen Insurance and Albertsons Companies

The main advantage of trading using opposite Aspen Insurance and Albertsons Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aspen Insurance position performs unexpectedly, Albertsons Companies 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 Albertsons Companies will offset losses from the drop in Albertsons Companies' long position.

The idea behind Aspen Insurance Holdings and Albertsons Companies 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .