Correlation Between Visa and Aon PLC
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Aon PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Aon PLC, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Aon PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Aon PLC.
Diversification Opportunities for Visa and Aon PLC
Modest diversification
The 3 months correlation between Visa and Aon is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Aon PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aon PLC and Visa 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 Visa Class A 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 Visa i.e., Visa and Aon PLC go up and down completely randomly.
Pair Corralation between Visa and Aon PLC
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.85 times more return on investment than Aon PLC. However, Visa Class A is 1.17 times less risky than Aon PLC. It trades about 0.21 of its potential returns per unit of risk. Aon PLC is currently generating about 0.03 per unit of risk. If you would invest 31,866 in Visa Class A on October 28, 2024 and sell it today you would earn a total of 1,154 from holding Visa Class A or generate 3.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Visa Class A vs. Aon PLC
Performance |
| Timeline |
| Visa Class A |
| Aon PLC |
Visa and Aon PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Aon PLC
The main advantage of trading using opposite Visa and Aon PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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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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