Correlation Between Marsh McLennan and Kingstone Companies

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Can any of the company-specific risk be diversified away by investing in both Marsh McLennan and Kingstone Companies 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 Kingstone Companies 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 Kingstone Companies, you can compare the effects of market volatilities on Marsh McLennan and Kingstone Companies 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 Kingstone Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marsh McLennan and Kingstone Companies.

Diversification Opportunities for Marsh McLennan and Kingstone Companies

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Marsh and Kingstone is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Marsh McLennan Companies and Kingstone Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingstone Companies 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 Kingstone Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingstone Companies has no effect on the direction of Marsh McLennan i.e., Marsh McLennan and Kingstone Companies go up and down completely randomly.

Pair Corralation between Marsh McLennan and Kingstone Companies

Considering the 90-day investment horizon Marsh McLennan is expected to generate 7.88 times less return on investment than Kingstone Companies. But when comparing it to its historical volatility, Marsh McLennan Companies is 2.91 times less risky than Kingstone Companies. It trades about 0.08 of its potential returns per unit of risk. Kingstone Companies is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  355.00  in Kingstone Companies on December 29, 2023 and sell it today you would earn a total of  34.00  from holding Kingstone Companies or generate 9.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Marsh McLennan Companies  vs.  Kingstone Companies

 Performance 
       Timeline  
Marsh McLennan Companies 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Marsh McLennan Companies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating primary indicators, Marsh McLennan may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Kingstone Companies 

Risk-Adjusted Performance

21 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Kingstone Companies are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Kingstone Companies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Marsh McLennan and Kingstone Companies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Marsh McLennan and Kingstone Companies

The main advantage of trading using opposite Marsh McLennan and Kingstone Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marsh McLennan position performs unexpectedly, Kingstone Companies 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 Kingstone Companies will offset losses from the drop in Kingstone Companies' long position.
The idea behind Marsh McLennan Companies and Kingstone Companies 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.
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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