Correlation Between Fanhua and Aon PLC
Can any of the company-specific risk be diversified away by investing in both Fanhua 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 Fanhua and Aon PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fanhua Inc and Aon PLC, you can compare the effects of market volatilities on Fanhua 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 Fanhua with a short position of Aon PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fanhua and Aon PLC.
Diversification Opportunities for Fanhua and Aon PLC
Excellent diversification
The 3 months correlation between Fanhua and Aon is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Fanhua Inc and Aon PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aon PLC and Fanhua 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 Fanhua Inc 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 Fanhua i.e., Fanhua and Aon PLC go up and down completely randomly.
Pair Corralation between Fanhua and Aon PLC
Given the investment horizon of 90 days Fanhua Inc is expected to under-perform the Aon PLC. In addition to that, Fanhua is 4.13 times more volatile than Aon PLC. It trades about -0.3 of its total potential returns per unit of risk. Aon PLC is currently generating about -0.23 per unit of volatility. If you would invest 32,607 in Aon PLC on January 20, 2024 and sell it today you would lose (1,737) from holding Aon PLC or give up 5.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Fanhua Inc vs. Aon PLC
Performance |
| Timeline |
| Fanhua Inc |
| Aon PLC |
Fanhua and Aon PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fanhua and Aon PLC
The main advantage of trading using opposite Fanhua and Aon PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fanhua 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.| Fanhua vs. Erie Indemnity | Fanhua vs. Crawford Company | Fanhua vs. Crawford Company | Fanhua vs. CorVel Corp |
| Aon PLC vs. Erie Indemnity | Aon PLC vs. Crawford Company | Aon PLC vs. Crawford Company | Aon PLC vs. CorVel Corp |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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