Correlation Between Aspen Insurance and Orchestra BioMed

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

Diversification Opportunities for Aspen Insurance and Orchestra BioMed

-0.07

Correlation Coefficient

Aspen Insurance  Orchestra BioMed

Good diversification

The 3 months correlation between Aspen and Orchestra is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Insurance Holdings and Orchestra BioMed Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orchestra BioMed Holdings 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 Orchestra BioMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orchestra BioMed Holdings has no effect on the direction of Aspen Insurance i.e., Aspen Insurance and Orchestra BioMed go up and down completely randomly.

Pair Corralation between Aspen Insurance and Orchestra BioMed

Assuming the 90 days trading horizon Aspen Insurance Holdings is expected to generate 0.23 times more return on investment than Orchestra BioMed. However, Aspen Insurance Holdings is 4.27 times less risky than Orchestra BioMed. It trades about 0.01 of its potential returns per unit of risk. Orchestra BioMed Holdings is currently generating about -0.01 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 Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Aspen Insurance Holdings  vs.  Orchestra BioMed Holdings

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.

Orchestra BioMed Holdings

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Orchestra BioMed Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Orchestra BioMed is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aspen Insurance and Orchestra BioMed

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

The idea behind Aspen Insurance Holdings and Orchestra BioMed 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.