Correlation Between Diageo PLC and Aspen Insurance
Can any of the company-specific risk be diversified away by investing in both Diageo PLC 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 Diageo PLC and Aspen Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diageo PLC ADR and Aspen Insurance Holdings, you can compare the effects of market volatilities on Diageo PLC 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 Diageo PLC with a short position of Aspen Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and Aspen Insurance.
Diversification Opportunities for Diageo PLC and Aspen Insurance
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Diageo and Aspen is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR 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 Diageo PLC 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 Diageo PLC ADR 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 Diageo PLC i.e., Diageo PLC and Aspen Insurance go up and down completely randomly.
Pair Corralation between Diageo PLC and Aspen Insurance
Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the Aspen Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Diageo PLC ADR is 1.46 times less risky than Aspen Insurance. The stock trades about -0.14 of its potential returns per unit of risk. The Aspen Insurance Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,127 in Aspen Insurance Holdings on September 3, 2024 and sell it today you would earn a total of 81.00 from holding Aspen Insurance Holdings or generate 3.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diageo PLC ADR vs. Aspen Insurance Holdings
Performance |
| Timeline |
| Diageo PLC ADR |
| Aspen Insurance Holdings |
Diageo PLC and Aspen Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and Aspen Insurance
The main advantage of trading using opposite Diageo PLC and Aspen Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC 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.| Diageo PLC vs. Brown Forman | Diageo PLC vs. MGP Ingredients | Diageo PLC vs. Duckhorn Portfolio | Diageo PLC vs. Brown Forman |
| Aspen Insurance vs. Aspen Insurance Holdings | Aspen Insurance vs. Selective Insurance Group | Aspen Insurance vs. The Allstate | Aspen Insurance vs. AmTrust Financial Services |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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