Correlation Between United Fire and Aspen Insurance
Can any of the company-specific risk be diversified away by investing in both United Fire 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 United Fire and Aspen Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Fire Group and Aspen Insurance Holdings, you can compare the effects of market volatilities on United Fire 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 United Fire with a short position of Aspen Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Fire and Aspen Insurance.
Diversification Opportunities for United Fire and Aspen Insurance
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between United and Aspen is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group 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 United Fire 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 United Fire Group 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 United Fire i.e., United Fire and Aspen Insurance go up and down completely randomly.
Pair Corralation between United Fire and Aspen Insurance
Given the investment horizon of 90 days United Fire Group is expected to generate 2.98 times more return on investment than Aspen Insurance. However, United Fire is 2.98 times more volatile than Aspen Insurance Holdings. It trades about 0.19 of its potential returns per unit of risk. Aspen Insurance Holdings is currently generating about 0.05 per unit of risk. If you would invest 2,038 in United Fire Group on August 28, 2024 and sell it today you would earn a total of 1,009 from holding United Fire Group or generate 49.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Fire Group vs. Aspen Insurance Holdings
Performance |
| Timeline |
| United Fire Group |
| Aspen Insurance Holdings |
United Fire and Aspen Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Fire and Aspen Insurance
The main advantage of trading using opposite United Fire and Aspen Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Fire 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.| United Fire vs. Donegal Group B | United Fire vs. Horace Mann Educators | United Fire vs. Donegal Group A | United Fire vs. Global Indemnity PLC |
| 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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