Correlation Between Steadfast Group and Willis Towers

Can any of the company-specific risk be diversified away by investing in both Steadfast Group and Willis Towers 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 Steadfast Group and Willis Towers into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Steadfast Group Limited and Willis Towers Watson, you can compare the effects of market volatilities on Steadfast Group and Willis Towers 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 Steadfast Group with a short position of Willis Towers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steadfast Group and Willis Towers.

Diversification Opportunities for Steadfast Group and Willis Towers

0.62

Correlation Coefficient

Steadfast Group  Willis Towers

Poor diversification

The 3 months correlation between Steadfast and Willis is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Steadfast Group Limited and Willis Towers Watson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willis Towers Watson and Steadfast Group 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 Steadfast Group Limited are associated (or correlated) with Willis Towers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willis Towers Watson has no effect on the direction of Steadfast Group i.e., Steadfast Group and Willis Towers go up and down completely randomly.

Pair Corralation between Steadfast Group and Willis Towers

Assuming the 90 days horizon Steadfast Group is expected to generate 3.45 times less return on investment than Willis Towers. In addition to that, Steadfast Group is 1.39 times more volatile than Willis Towers Watson. It trades about 0.02 of its total potential returns per unit of risk. Willis Towers Watson is currently generating about 0.1 per unit of volatility. If you would invest  22,078  in Willis Towers Watson on September 27, 2024 and sell it today you would earn a total of  8,322  from holding Willis Towers Watson or generate 37.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Steadfast Group Limited  vs.  Willis Towers Watson

Steadfast Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steadfast Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Steadfast Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Willis Towers Watson

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Willis Towers Watson are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Willis Towers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steadfast Group and Willis Towers

The main advantage of trading using opposite Steadfast Group and Willis Towers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steadfast Group position performs unexpectedly, Willis Towers 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 Willis Towers will offset losses from the drop in Willis Towers' long position.

The idea behind Steadfast Group Limited and Willis Towers Watson 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.