Correlation Between Aspen Insurance and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both Aspen Insurance and Diageo PLC 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 Diageo PLC 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 Diageo PLC ADR, you can compare the effects of market volatilities on Aspen Insurance and Diageo PLC 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 Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aspen Insurance and Diageo PLC.
Diversification Opportunities for Aspen Insurance and Diageo PLC
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Aspen and Diageo is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Insurance Holdings and Diageo PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo PLC ADR 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 Diageo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo PLC ADR has no effect on the direction of Aspen Insurance i.e., Aspen Insurance and Diageo PLC go up and down completely randomly.
Pair Corralation between Aspen Insurance and Diageo PLC
Assuming the 90 days trading horizon Aspen Insurance Holdings is expected to generate 1.11 times more return on investment than Diageo PLC. However, Aspen Insurance is 1.11 times more volatile than Diageo PLC ADR. It trades about 0.04 of its potential returns per unit of risk. Diageo PLC ADR is currently generating about -0.05 per unit of risk. If you would invest 1,702 in Aspen Insurance Holdings on September 3, 2024 and sell it today you would earn a total of 506.00 from holding Aspen Insurance Holdings or generate 29.73% 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. Diageo PLC ADR
Performance |
| Timeline |
| Aspen Insurance Holdings |
| Diageo PLC ADR |
Aspen Insurance and Diageo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aspen Insurance and Diageo PLC
The main advantage of trading using opposite Aspen Insurance and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aspen Insurance position performs unexpectedly, Diageo PLC 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 Diageo PLC will offset losses from the drop in Diageo PLC's 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 |
| Diageo PLC vs. Brown Forman | Diageo PLC vs. MGP Ingredients | Diageo PLC vs. Duckhorn Portfolio | Diageo PLC vs. Brown Forman |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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