Correlation Between Marsh McLennan and Aon PLC
Can any of the company-specific risk be diversified away by investing in both Marsh McLennan 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 Marsh McLennan and Aon PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marsh McLennan Companies and Aon PLC, you can compare the effects of market volatilities on Marsh McLennan 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 Marsh McLennan with a short position of Aon PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marsh McLennan and Aon PLC.
Diversification Opportunities for Marsh McLennan and Aon PLC
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Marsh and Aon is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Marsh McLennan Companies and Aon PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aon PLC and Marsh McLennan 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 Marsh McLennan Companies 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 Marsh McLennan i.e., Marsh McLennan and Aon PLC go up and down completely randomly.
Pair Corralation between Marsh McLennan and Aon PLC
Considering the 90-day investment horizon Marsh McLennan Companies is expected to generate 0.95 times more return on investment than Aon PLC. However, Marsh McLennan Companies is 1.06 times less risky than Aon PLC. It trades about -0.09 of its potential returns per unit of risk. Aon PLC is currently generating about -0.23 per unit of risk. If you would invest 20,573 in Marsh McLennan Companies on January 20, 2024 and sell it today you would lose (400.00) from holding Marsh McLennan Companies or give up 1.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Marsh McLennan Companies vs. Aon PLC
Performance |
| Timeline |
| Marsh McLennan Companies |
| Aon PLC |
Marsh McLennan and Aon PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Marsh McLennan and Aon PLC
The main advantage of trading using opposite Marsh McLennan and Aon PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marsh McLennan 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.| Marsh McLennan vs. Erie Indemnity | Marsh McLennan vs. Crawford Company | Marsh McLennan vs. Crawford Company | Marsh McLennan vs. CorVel Corp |
| Aon PLC vs. Erie Indemnity | Aon PLC vs. Crawford Company | Aon PLC vs. Crawford Company | Aon PLC vs. CorVel Corp |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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