Correlation Between National Retail and Aon PLC

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

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

Diversification Opportunities for National Retail and Aon PLC

0.07

Correlation Coefficient

National Retail  Aon PLC

Significant diversification

The 3 months correlation between National and Aon is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties and Aon PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aon PLC and National Retail 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 National Retail Properties 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 National Retail i.e., National Retail and Aon PLC go up and down completely randomly.

Pair Corralation between National Retail and Aon PLC

Assuming the 90 days trading horizon National Retail is expected to generate 7.7 times less return on investment than Aon PLC. But when comparing it to its historical volatility, National Retail Properties is 1.03 times less risky than Aon PLC. It trades about 0.0 of its potential returns per unit of risk. Aon PLC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  28,360  in Aon PLC on October 10, 2024 and sell it today you would earn a total of  4,930  from holding Aon PLC or generate 17.38% return on investment over 90 days.

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

National Retail Properties  vs.  Aon PLC

National Retail Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Retail Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Aon PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aon PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Aon PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with National Retail and Aon PLC

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

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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.