Correlation Between Aspen Insurance and Palomar Holdings
Can any of the company-specific risk be diversified away by investing in both Aspen Insurance and Palomar Holdings 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 Palomar Holdings 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 Palomar Holdings, you can compare the effects of market volatilities on Aspen Insurance and Palomar Holdings 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 Palomar Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aspen Insurance and Palomar Holdings.
Diversification Opportunities for Aspen Insurance and Palomar Holdings
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Aspen and Palomar is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Insurance Holdings and Palomar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palomar 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 Palomar Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palomar Holdings has no effect on the direction of Aspen Insurance i.e., Aspen Insurance and Palomar Holdings go up and down completely randomly.
Pair Corralation between Aspen Insurance and Palomar Holdings
Assuming the 90 days trading horizon Aspen Insurance is expected to generate 3.18 times less return on investment than Palomar Holdings. But when comparing it to its historical volatility, Aspen Insurance Holdings is 1.67 times less risky than Palomar Holdings. It trades about 0.04 of its potential returns per unit of risk. Palomar Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 5,285 in Palomar Holdings on August 27, 2024 and sell it today you would earn a total of 5,547 from holding Palomar Holdings or generate 104.96% 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. Palomar Holdings
Performance |
| Timeline |
| Aspen Insurance Holdings |
| Palomar Holdings |
Aspen Insurance and Palomar Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aspen Insurance and Palomar Holdings
The main advantage of trading using opposite Aspen Insurance and Palomar Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aspen Insurance position performs unexpectedly, Palomar Holdings 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 Palomar Holdings will offset losses from the drop in Palomar Holdings' 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 |
| Palomar Holdings vs. Horace Mann Educators | Palomar Holdings vs. Kemper | Palomar Holdings vs. RLI Corp | Palomar Holdings vs. Global Indemnity PLC |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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