Correlation Between Marsh McLennan and Argentum

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

By analyzing existing cross correlation between Marsh McLennan Companies and Argentum 47, you can compare the effects of market volatilities on Marsh McLennan and Argentum 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 Marsh McLennan with a short position of Argentum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marsh McLennan and Argentum.

Diversification Opportunities for Marsh McLennan and Argentum

0.56

Correlation Coefficient

Marsh McLennan  Argentum

Very weak diversification

The 3 months correlation between Marsh and Argentum is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Marsh McLennan Companies and Argentum 47 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argentum 47 and Marsh McLennan 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 Marsh McLennan Companies are associated (or correlated) with Argentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argentum 47 has no effect on the direction of Marsh McLennan i.e., Marsh McLennan and Argentum go up and down completely randomly.

Pair Corralation between Marsh McLennan and Argentum

Considering the 90-day investment horizon Marsh McLennan is expected to generate 5.89 times less return on investment than Argentum. But when comparing it to its historical volatility, Marsh McLennan Companies is 15.34 times less risky than Argentum. It trades about 0.59 of its potential returns per unit of risk. Argentum 47 is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  0.61  in Argentum 47 on December 2, 2024 and sell it today you would earn a total of  0.34  from holding Argentum 47 or generate 55.74% return on investment over 90 days.

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

Marsh McLennan Companies  vs.  Argentum 47

Marsh McLennan Companies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Marsh McLennan Companies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Marsh McLennan is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Argentum 47

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Argentum 47 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal technical and fundamental indicators, Argentum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Marsh McLennan and Argentum

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

The idea behind Marsh McLennan Companies and Argentum 47 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.