Correlation Between Aon PLC and Fanhua

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

By analyzing existing cross correlation between Aon PLC and Fanhua Inc, you can compare the effects of market volatilities on Aon PLC 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 Aon PLC with a short position of Fanhua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aon PLC and Fanhua.

Diversification Opportunities for Aon PLC and Fanhua

-0.34

Correlation Coefficient

Aon PLC  Fanhua

Very good diversification

The 3 months correlation between Aon and Fanhua is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Aon PLC and Fanhua Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fanhua Inc and Aon PLC 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 Aon PLC 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 Aon PLC i.e., Aon PLC and Fanhua go up and down completely randomly.

Pair Corralation between Aon PLC and Fanhua

Assuming the 90 days horizon Aon PLC is expected to generate 0.3 times more return on investment than Fanhua. However, Aon PLC is 3.3 times less risky than Fanhua. It trades about 0.04 of its potential returns per unit of risk. Fanhua Inc is currently generating about -0.07 per unit of risk. If you would invest  28,315  in Aon PLC on September 28, 2024 and sell it today you would earn a total of  5,935  from holding Aon PLC or generate 20.96% return on investment over 90 days.

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

Aon PLC  vs.  Fanhua Inc

Aon PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aon PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aon PLC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fanhua Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fanhua Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Aon PLC and Fanhua

The main advantage of trading using opposite Aon PLC and Fanhua positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aon PLC 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.

The idea behind Aon PLC and Fanhua Inc 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.