Correlation Between Dennys Corp and Aspen Insurance

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

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

Diversification Opportunities for Dennys Corp and Aspen Insurance

0.18

Correlation Coefficient

Dennys Corp  Aspen Insurance

Average diversification

The 3 months correlation between Dennys and Aspen is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Dennys Corp 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 Dennys Corp 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 Dennys Corp 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 Dennys Corp i.e., Dennys Corp and Aspen Insurance go up and down completely randomly.

Pair Corralation between Dennys Corp and Aspen Insurance

Given the investment horizon of 90 days Dennys Corp is expected to under-perform the Aspen Insurance. In addition to that, Dennys Corp is 1.59 times more volatile than Aspen Insurance Holdings. It trades about -0.28 of its total potential returns per unit of risk. Aspen Insurance Holdings is currently generating about -0.36 per unit of volatility. If you would invest  2,137  in Aspen Insurance Holdings on January 20, 2024 and sell it today you would lose (194.00) from holding Aspen Insurance Holdings or give up 9.08% of portfolio value over 90 days.

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

Dennys Corp  vs.  Aspen Insurance Holdings

Dennys Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dennys Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Aspen Insurance Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aspen Insurance Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Aspen Insurance is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dennys Corp and Aspen Insurance

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

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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 Transaction History module to view history of all your transactions and understand their impact on performance.