Correlation Between Maiden Holdings and Aspen Insurance

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

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

Diversification Opportunities for Maiden Holdings and Aspen Insurance

-0.52

Correlation Coefficient

Maiden Holdings  Aspen Insurance

Excellent diversification

The 3 months correlation between Maiden and Aspen is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Maiden Holdings 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 Maiden Holdings 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 Maiden Holdings 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 Maiden Holdings i.e., Maiden Holdings and Aspen Insurance go up and down completely randomly.

Pair Corralation between Maiden Holdings and Aspen Insurance

Given the investment horizon of 90 days Maiden Holdings is expected to generate 3.6 times more return on investment than Aspen Insurance. However, Maiden Holdings is 3.6 times more volatile than Aspen Insurance Holdings. It trades about 0.14 of its potential returns per unit of risk. Aspen Insurance Holdings is currently generating about -0.18 per unit of risk. If you would invest  189.00  in Maiden Holdings on January 25, 2024 and sell it today you would earn a total of  23.00  from holding Maiden Holdings or generate 12.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Maiden Holdings  vs.  Aspen Insurance Holdings

Maiden Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Maiden Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Maiden Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Maiden Holdings and Aspen Insurance

The main advantage of trading using opposite Maiden Holdings and Aspen Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maiden Holdings 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 Maiden Holdings 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.