Correlation Between FANH Old and Aon PLC

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

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

Diversification Opportunities for FANH Old and Aon PLC

-0.22

Correlation Coefficient

FANH Old  Aon PLC

Very good diversification

The 3 months correlation between FANH and Aon is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding FANH Old and Aon PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aon PLC and FANH Old 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 FANH Old 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 FANH Old i.e., FANH Old and Aon PLC go up and down completely randomly.

Pair Corralation between FANH Old and Aon PLC

Given the investment horizon of 90 days FANH Old is expected to under-perform the Aon PLC. In addition to that, FANH Old is 3.47 times more volatile than Aon PLC. It trades about -0.06 of its total potential returns per unit of risk. Aon PLC is currently generating about 0.02 per unit of volatility. 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

FANH Old  vs.  Aon PLC

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 weak 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.

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 FANH Old and Aon PLC

The main advantage of trading using opposite FANH Old and Aon PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FANH Old 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 FANH Old 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.