Correlation Between Aon PLC and Arthur J
Can any of the company-specific risk be diversified away by investing in both Aon PLC and Arthur J 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 Aon PLC and Arthur J into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aon PLC and Arthur J Gallagher, you can compare the effects of market volatilities on Aon PLC and Arthur J 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 Aon PLC with a short position of Arthur J. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aon PLC and Arthur J.
Diversification Opportunities for Aon PLC and Arthur J
Very poor diversification
The 3 months correlation between Aon and Arthur is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Aon PLC and Arthur J Gallagher in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arthur J Gallagher and Aon PLC 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 Aon PLC are associated (or correlated) with Arthur J. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arthur J Gallagher has no effect on the direction of Aon PLC i.e., Aon PLC and Arthur J go up and down completely randomly.
Pair Corralation between Aon PLC and Arthur J
Assuming the 90 days horizon Aon PLC is expected to generate 2.02 times less return on investment than Arthur J. But when comparing it to its historical volatility, Aon PLC is 1.06 times less risky than Arthur J. It trades about 0.04 of its potential returns per unit of risk. Arthur J Gallagher is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 17,435 in Arthur J Gallagher on October 27, 2024 and sell it today you would earn a total of 9,855 from holding Arthur J Gallagher or generate 56.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aon PLC vs. Arthur J Gallagher
Performance |
| Timeline |
| Aon PLC |
| Arthur J Gallagher |
Aon PLC and Arthur J Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aon PLC and Arthur J
The main advantage of trading using opposite Aon PLC and Arthur J positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aon PLC position performs unexpectedly, Arthur J 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 Arthur J will offset losses from the drop in Arthur J's long position.| Aon PLC vs. Prosiebensat 1 Media | Aon PLC vs. Flutter Entertainment PLC | Aon PLC vs. PLAYTIKA HOLDING DL 01 | Aon PLC vs. Aristocrat Leisure Limited |
| Arthur J vs. NAKED WINES PLC | Arthur J vs. Peijia Medical Limited | Arthur J vs. Broadcom | Arthur J vs. PULSION Medical Systems |
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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