Correlation Between Willis Towers and Aon PLC
Can any of the company-specific risk be diversified away by investing in both Willis Towers 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 Willis Towers and Aon PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Willis Towers Watson and Aon PLC, you can compare the effects of market volatilities on Willis Towers 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 Willis Towers with a short position of Aon PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Willis Towers and Aon PLC.
Diversification Opportunities for Willis Towers and Aon PLC
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Willis and Aon is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Willis Towers Watson and Aon PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aon PLC and Willis Towers 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 Willis Towers Watson 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 Willis Towers i.e., Willis Towers and Aon PLC go up and down completely randomly.
Pair Corralation between Willis Towers and Aon PLC
Assuming the 90 days horizon Willis Towers Watson is expected to generate 1.02 times more return on investment than Aon PLC. However, Willis Towers is 1.02 times more volatile than Aon PLC. It trades about 0.27 of its potential returns per unit of risk. Aon PLC is currently generating about -0.02 per unit of risk. If you would invest 29,115 in Willis Towers Watson on October 12, 2024 and sell it today you would earn a total of 1,285 from holding Willis Towers Watson or generate 4.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Willis Towers Watson vs. Aon PLC
Performance |
| Timeline |
| Willis Towers Watson |
| Aon PLC |
Willis Towers and Aon PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Willis Towers and Aon PLC
The main advantage of trading using opposite Willis Towers and Aon PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willis Towers 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.| Willis Towers vs. ZINC MEDIA GR | Willis Towers vs. Datadog | Willis Towers vs. SILVER BULLET DATA | Willis Towers vs. CNVISION MEDIA |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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