Correlation Between Allianz SE and Aon PLC

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

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

Diversification Opportunities for Allianz SE and Aon PLC

-0.62

Correlation Coefficient

Allianz SE  Aon PLC

Excellent diversification

The 3 months correlation between Allianz and Aon is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Allianz SE ADR and Aon PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aon PLC and Allianz SE 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 Allianz SE ADR 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 Allianz SE i.e., Allianz SE and Aon PLC go up and down completely randomly.

Pair Corralation between Allianz SE and Aon PLC

Assuming the 90 days horizon Allianz SE ADR is expected to generate 1.06 times more return on investment than Aon PLC. However, Allianz SE is 1.06 times more volatile than Aon PLC. It trades about 0.04 of its potential returns per unit of risk. Aon PLC is currently generating about 0.02 per unit of risk. If you would invest  2,232  in Allianz SE ADR on October 10, 2024 and sell it today you would earn a total of  147.00  from holding Allianz SE ADR or generate 6.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	25.86%
Values	Daily Returns

Allianz SE ADR  vs.  Aon PLC

Allianz SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allianz SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Allianz SE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aon PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aon PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Aon PLC is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Allianz SE and Aon PLC

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

The idea behind Allianz SE ADR and Aon PLC 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.