Correlation Between Aon PLC and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Aon PLC and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aon PLC and Dow Jones Industrial, you can compare the effects of market volatilities on Aon PLC and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aon PLC and Dow Jones.
Diversification Opportunities for Aon PLC and Dow Jones
Very poor diversification
The 3 months correlation between Aon and Dow is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Aon PLC and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Aon PLC i.e., Aon PLC and Dow Jones go up and down completely randomly.
Pair Corralation between Aon PLC and Dow Jones
Considering the 90-day investment horizon Aon PLC is expected to generate 1.6 times more return on investment than Dow Jones. However, Aon PLC is 1.6 times more volatile than Dow Jones Industrial. It trades about 0.22 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.15 per unit of risk. If you would invest 35,763 in Aon PLC on August 24, 2024 and sell it today you would earn a total of 2,778 from holding Aon PLC or generate 7.77% 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. Dow Jones Industrial
Performance |
| Timeline |
Aon PLC and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Aon PLC
Pair trading matchups for Aon PLC
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Aon PLC and Dow Jones
The main advantage of trading using opposite Aon PLC and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aon PLC position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Aon PLC vs. Arthur J Gallagher | Aon PLC vs. Brown Brown | Aon PLC vs. Willis Towers Watson | Aon PLC vs. Erie Indemnity |
| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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