Correlation Between Aspen Insurance and NETGEAR

Can any of the company-specific risk be diversified away by investing in both Aspen Insurance and NETGEAR 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 NETGEAR 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 NETGEAR, you can compare the effects of market volatilities on Aspen Insurance and NETGEAR 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 NETGEAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aspen Insurance and NETGEAR.

Diversification Opportunities for Aspen Insurance and NETGEAR

0.02

Correlation Coefficient

Aspen Insurance  NETGEAR

Significant diversification

The 3 months correlation between Aspen and NETGEAR is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Insurance Holdings and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Aspen Insurance i.e., Aspen Insurance and NETGEAR go up and down completely randomly.

Pair Corralation between Aspen Insurance and NETGEAR

Assuming the 90 days trading horizon Aspen Insurance Holdings is expected to under-perform the NETGEAR. But the preferred stock apears to be less risky and, when comparing its historical volatility, Aspen Insurance Holdings is 1.92 times less risky than NETGEAR. The preferred stock trades about -0.03 of its potential returns per unit of risk. The NETGEAR is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,007  in NETGEAR on September 23, 2024 and sell it today you would earn a total of  793.00  from holding NETGEAR or generate 39.51% return on investment over 90 days.

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

Aspen Insurance Holdings  vs.  NETGEAR

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

NETGEAR

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aspen Insurance and NETGEAR

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

The idea behind Aspen Insurance Holdings and NETGEAR 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.

Check out your portfolio center.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.