Correlation Between Aspen Insurance and American Airlines
Can any of the company-specific risk be diversified away by investing in both Aspen Insurance and American Airlines 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 American Airlines 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 American Airlines Group, you can compare the effects of market volatilities on Aspen Insurance and American Airlines 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 American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aspen Insurance and American Airlines.
Diversification Opportunities for Aspen Insurance and American Airlines
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Aspen and American is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Insurance Holdings and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Aspen Insurance i.e., Aspen Insurance and American Airlines go up and down completely randomly.
Pair Corralation between Aspen Insurance and American Airlines
Assuming the 90 days trading horizon Aspen Insurance Holdings is expected to under-perform the American Airlines. But the preferred stock apears to be less risky and, when comparing its historical volatility, Aspen Insurance Holdings is 4.06 times less risky than American Airlines. The preferred stock trades about -0.27 of its potential returns per unit of risk. The American Airlines Group is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 1,067 in American Airlines Group on January 12, 2025 and sell it today you would lose (116.00) from holding American Airlines Group or give up 10.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aspen Insurance Holdings vs. American Airlines Group
Performance |
| Timeline |
| Aspen Insurance Holdings |
| American Airlines |
Aspen Insurance and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aspen Insurance and American Airlines
The main advantage of trading using opposite Aspen Insurance and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aspen Insurance position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.| Aspen Insurance vs. Aspen Insurance Holdings | Aspen Insurance vs. Selective Insurance Group | Aspen Insurance vs. The Allstate | Aspen Insurance vs. AmTrust Financial Services |
| American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. United Airlines Holdings | American Airlines vs. Frontier Group Holdings |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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