Correlation Between Aon PLC and FANH Old

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

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

Diversification Opportunities for Aon PLC and FANH Old

-0.22

Correlation Coefficient

Aon PLC  FANH Old

Very good diversification

The 3 months correlation between Aon and FANH is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Aon PLC and FANH Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FANH Old 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 FANH Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FANH Old has no effect on the direction of Aon PLC i.e., Aon PLC and FANH Old go up and down completely randomly.

Pair Corralation between Aon PLC and FANH Old

Considering the 90-day investment horizon Aon PLC is expected to generate 0.29 times more return on investment than FANH Old. However, Aon PLC is 3.47 times less risky than FANH Old. It trades about 0.02 of its potential returns per unit of risk. FANH Old is currently generating about -0.06 per unit of risk. If you would invest  31,393  in Aon PLC on October 10, 2024 and sell it today you would earn a total of  3,451  from holding Aon PLC or generate 10.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.9%
Values	Daily Returns

Aon PLC  vs.  FANH Old

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.

FANH Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FANH Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Aon PLC and FANH Old

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

The idea behind Aon PLC and FANH Old 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.