Correlation Between Arthur J and Marsh McLennan
Can any of the company-specific risk be diversified away by investing in both Arthur J and Marsh McLennan 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 Marsh McLennan 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 Marsh McLennan Companies, you can compare the effects of market volatilities on Arthur J and Marsh McLennan 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 Marsh McLennan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arthur J and Marsh McLennan.
Diversification Opportunities for Arthur J and Marsh McLennan
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Arthur and Marsh is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Arthur J Gallagher and Marsh McLennan Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marsh McLennan Companies 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 Marsh McLennan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marsh McLennan Companies has no effect on the direction of Arthur J i.e., Arthur J and Marsh McLennan go up and down completely randomly.
Pair Corralation between Arthur J and Marsh McLennan
Assuming the 90 days horizon Arthur J Gallagher is expected to generate 1.41 times more return on investment than Marsh McLennan. However, Arthur J is 1.41 times more volatile than Marsh McLennan Companies. It trades about 0.09 of its potential returns per unit of risk. Marsh McLennan Companies is currently generating about 0.05 per unit of risk. If you would invest 21,849 in Arthur J Gallagher on October 12, 2024 and sell it today you would earn a total of 5,951 from holding Arthur J Gallagher or generate 27.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arthur J Gallagher vs. Marsh McLennan Companies
Performance |
| Timeline |
| Arthur J Gallagher |
| Marsh McLennan Companies |
Arthur J and Marsh McLennan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arthur J and Marsh McLennan
The main advantage of trading using opposite Arthur J and Marsh McLennan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arthur J position performs unexpectedly, Marsh McLennan 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 Marsh McLennan will offset losses from the drop in Marsh McLennan's long position.| Arthur J vs. Gol Intelligent Airlines | Arthur J vs. T Mobile | Arthur J vs. JAPAN AIRLINES | Arthur J vs. ecotel communication ag |
| Marsh McLennan vs. NH HOTEL GROUP | Marsh McLennan vs. The Hongkong and | Marsh McLennan vs. Thai Beverage Public | Marsh McLennan vs. TYSON FOODS A |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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