Correlation Between Arthur J and Aon PLC
Can any of the company-specific risk be diversified away by investing in both Arthur J and Aon PLC 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 Arthur J and Aon PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arthur J Gallagher and Aon PLC, you can compare the effects of market volatilities on Arthur J and Aon PLC 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 Arthur J with a short position of Aon PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arthur J and Aon PLC.
Diversification Opportunities for Arthur J and Aon PLC
Poor diversification
The 3 months correlation between Arthur and Aon is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Arthur J Gallagher and Aon PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aon PLC and Arthur J 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 Arthur J Gallagher are associated (or correlated) with Aon PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aon PLC has no effect on the direction of Arthur J i.e., Arthur J and Aon PLC go up and down completely randomly.
Pair Corralation between Arthur J and Aon PLC
Considering the 90-day investment horizon Arthur J Gallagher is expected to generate 0.91 times more return on investment than Aon PLC. However, Arthur J Gallagher is 1.1 times less risky than Aon PLC. It trades about -0.14 of its potential returns per unit of risk. Aon PLC is currently generating about -0.21 per unit of risk. If you would invest 24,558 in Arthur J Gallagher on January 25, 2024 and sell it today you would lose (771.00) from holding Arthur J Gallagher or give up 3.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Arthur J Gallagher vs. Aon PLC
Performance |
| Timeline |
| Arthur J Gallagher |
| Aon PLC |
Arthur J and Aon PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arthur J and Aon PLC
The main advantage of trading using opposite Arthur J and Aon PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arthur J position performs unexpectedly, Aon PLC 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 Aon PLC will offset losses from the drop in Aon PLC's long position.| Arthur J vs. Aon PLC | Arthur J vs. Brown Brown | Arthur J vs. Willis Towers Watson | Arthur J vs. Erie Indemnity |
| Aon PLC vs. Arthur J Gallagher | Aon PLC vs. Brown Brown | Aon PLC vs. Willis Towers Watson | Aon PLC vs. Erie Indemnity |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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