Correlation Between AmTrust Financial and Aspen Insurance

Can any of the company-specific risk be diversified away by investing in both AmTrust Financial 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 AmTrust Financial and Aspen Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AmTrust Financial Services and Aspen Insurance Holdings, you can compare the effects of market volatilities on AmTrust Financial 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 AmTrust Financial with a short position of Aspen Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of AmTrust Financial and Aspen Insurance.

Diversification Opportunities for AmTrust Financial and Aspen Insurance

0.83

Correlation Coefficient

AmTrust Financial  Aspen Insurance

Very poor diversification

The 3 months correlation between AmTrust and Aspen is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding AmTrust Financial Services 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 AmTrust Financial 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 AmTrust Financial Services 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 AmTrust Financial i.e., AmTrust Financial and Aspen Insurance go up and down completely randomly.

Pair Corralation between AmTrust Financial and Aspen Insurance

Assuming the 90 days horizon AmTrust Financial Services is expected to generate 1.24 times more return on investment than Aspen Insurance. However, AmTrust Financial is 1.24 times more volatile than Aspen Insurance Holdings. It trades about 0.05 of its potential returns per unit of risk. Aspen Insurance Holdings is currently generating about 0.04 per unit of risk. If you would invest  1,067  in AmTrust Financial Services on August 3, 2024 and sell it today you would earn a total of  283.00  from holding AmTrust Financial Services or generate 26.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

AmTrust Financial Services  vs.  Aspen Insurance Holdings

AmTrust Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AmTrust Financial Services are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, AmTrust Financial may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Aspen Insurance Holdings

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aspen Insurance Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Aspen Insurance may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with AmTrust Financial and Aspen Insurance

The main advantage of trading using opposite AmTrust Financial and Aspen Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AmTrust Financial 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.

The idea behind AmTrust Financial Services and Aspen Insurance Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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.