Correlation Between AXIS Capital and Aspen Insurance

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

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

Diversification Opportunities for AXIS Capital and Aspen Insurance

0.5

Correlation Coefficient

AXIS Capital  Aspen Insurance

Very weak diversification

The 3 months correlation between AXIS and Aspen is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding AXIS Capital Holdings 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 AXIS Capital 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 AXIS Capital Holdings 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 AXIS Capital i.e., AXIS Capital and Aspen Insurance go up and down completely randomly.

Pair Corralation between AXIS Capital and Aspen Insurance

Assuming the 90 days trading horizon AXIS Capital is expected to generate 1.28 times less return on investment than Aspen Insurance. But when comparing it to its historical volatility, AXIS Capital Holdings is 1.73 times less risky than Aspen Insurance. It trades about 0.12 of its potential returns per unit of risk. Aspen Insurance Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,014  in Aspen Insurance Holdings on September 2, 2024 and sell it today you would earn a total of  143.00  from holding Aspen Insurance Holdings or generate 7.1% return on investment over 90 days.

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

AXIS Capital Holdings  vs.  Aspen Insurance Holdings

AXIS Capital Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AXIS Capital Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, AXIS Capital 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

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aspen Insurance Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Aspen Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with AXIS Capital and Aspen Insurance

The main advantage of trading using opposite AXIS Capital and Aspen Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AXIS Capital 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 AXIS Capital Holdings 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.