Correlation Between Arthur J and Willis Towers

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

By analyzing existing cross correlation between Arthur J Gallagher and Willis Towers Watson, you can compare the effects of market volatilities on Arthur J and Willis Towers 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 Arthur J with a short position of Willis Towers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arthur J and Willis Towers.

Diversification Opportunities for Arthur J and Willis Towers

0.84

Correlation Coefficient

Arthur J  Willis Towers

Very poor diversification

The 3 months correlation between Arthur and Willis is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Arthur J Gallagher and Willis Towers Watson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willis Towers Watson and Arthur J 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 Arthur J Gallagher are associated (or correlated) with Willis Towers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willis Towers Watson has no effect on the direction of Arthur J i.e., Arthur J and Willis Towers go up and down completely randomly.

Pair Corralation between Arthur J and Willis Towers

Assuming the 90 days horizon Arthur J Gallagher is expected to under-perform the Willis Towers. In addition to that, Arthur J is 1.11 times more volatile than Willis Towers Watson. It trades about -0.23 of its total potential returns per unit of risk. Willis Towers Watson is currently generating about 0.06 per unit of volatility. If you would invest  30,000  in Willis Towers Watson on September 27, 2024 and sell it today you would earn a total of  400.00  from holding Willis Towers Watson or generate 1.33% return on investment over 90 days.

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

Arthur J Gallagher  vs.  Willis Towers Watson

Arthur J Gallagher

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arthur J Gallagher are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Arthur J may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Willis Towers Watson

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Willis Towers Watson are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Willis Towers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arthur J and Willis Towers

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

The idea behind Arthur J Gallagher and Willis Towers Watson 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.