Correlation Between Marsh McLennan and Fanhua
Can any of the company-specific risk be diversified away by investing in both Marsh McLennan and Fanhua 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 Fanhua 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 Fanhua Inc, you can compare the effects of market volatilities on Marsh McLennan and Fanhua 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 Fanhua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marsh McLennan and Fanhua.
Diversification Opportunities for Marsh McLennan and Fanhua
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Marsh and Fanhua is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Marsh McLennan Companies and Fanhua Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fanhua Inc 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 Fanhua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fanhua Inc has no effect on the direction of Marsh McLennan i.e., Marsh McLennan and Fanhua go up and down completely randomly.
Pair Corralation between Marsh McLennan and Fanhua
Considering the 90-day investment horizon Marsh McLennan Companies is expected to generate 0.23 times more return on investment than Fanhua. However, Marsh McLennan Companies is 4.33 times less risky than Fanhua. It trades about -0.05 of its potential returns per unit of risk. Fanhua Inc is currently generating about -0.31 per unit of risk. If you would invest 20,471 in Marsh McLennan Companies on January 21, 2024 and sell it today you would lose (230.00) from holding Marsh McLennan Companies or give up 1.12% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 95.45% |
Values | Daily Returns |
Marsh McLennan Companies vs. Fanhua Inc
Performance |
Timeline |
Marsh McLennan Companies |
Fanhua Inc |
Marsh McLennan and Fanhua Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Marsh McLennan and Fanhua
The main advantage of trading using opposite Marsh McLennan and Fanhua positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marsh McLennan position performs unexpectedly, Fanhua 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 Fanhua will offset losses from the drop in Fanhua's long position.Marsh McLennan vs. Erie Indemnity | Marsh McLennan vs. Crawford Company | Marsh McLennan vs. Crawford Company | Marsh McLennan vs. CorVel Corp |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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