Correlation Between Highlight Communications and Aon PLC
Can any of the company-specific risk be diversified away by investing in both Highlight Communications 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 Highlight Communications and Aon PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highlight Communications AG and Aon PLC, you can compare the effects of market volatilities on Highlight Communications 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 Highlight Communications with a short position of Aon PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlight Communications and Aon PLC.
Diversification Opportunities for Highlight Communications and Aon PLC
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Highlight and Aon is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and Aon PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aon PLC and Highlight Communications 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 Highlight Communications AG 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 Highlight Communications i.e., Highlight Communications and Aon PLC go up and down completely randomly.
Pair Corralation between Highlight Communications and Aon PLC
Assuming the 90 days trading horizon Highlight Communications AG is expected to generate 7.98 times more return on investment than Aon PLC. However, Highlight Communications is 7.98 times more volatile than Aon PLC. It trades about 0.22 of its potential returns per unit of risk. Aon PLC is currently generating about -0.02 per unit of risk. If you would invest 115.00 in Highlight Communications AG on October 12, 2024 and sell it today you would earn a total of 31.00 from holding Highlight Communications AG or generate 26.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highlight Communications AG vs. Aon PLC
Performance |
| Timeline |
| Highlight Communications |
| Aon PLC |
Highlight Communications and Aon PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highlight Communications and Aon PLC
The main advantage of trading using opposite Highlight Communications and Aon PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highlight Communications 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.The idea behind Highlight Communications AG and Aon PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Aon PLC vs. Highlight Communications AG | Aon PLC vs. China Communications Services | Aon PLC vs. Singapore Telecommunications Limited | Aon PLC vs. Chunghwa Telecom Co |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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