Correlation Between Marsh McLennan and GoHealth

Can any of the company-specific risk be diversified away by investing in both Marsh McLennan and GoHealth 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 GoHealth 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 GoHealth, you can compare the effects of market volatilities on Marsh McLennan and GoHealth 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 GoHealth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marsh McLennan and GoHealth.

Diversification Opportunities for Marsh McLennan and GoHealth

0.12

Correlation Coefficient

Marsh McLennan  GoHealth

Average diversification

The 3 months correlation between Marsh and GoHealth is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Marsh McLennan Companies and GoHealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoHealth 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 GoHealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoHealth has no effect on the direction of Marsh McLennan i.e., Marsh McLennan and GoHealth go up and down completely randomly.

Pair Corralation between Marsh McLennan and GoHealth

Considering the 90-day investment horizon Marsh McLennan Companies is expected to generate 0.17 times more return on investment than GoHealth. However, Marsh McLennan Companies is 5.81 times less risky than GoHealth. It trades about 0.25 of its potential returns per unit of risk. GoHealth is currently generating about 0.02 per unit of risk. If you would invest  21,119  in Marsh McLennan Companies on December 29, 2024 and sell it today you would earn a total of  3,120  from holding Marsh McLennan Companies or generate 14.77% return on investment over 90 days.

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

Marsh McLennan Companies  vs.  GoHealth

Marsh McLennan Companies

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Marsh McLennan Companies are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, Marsh McLennan exhibited solid returns over the last few months and may actually be approaching a breakup point.

GoHealth

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GoHealth are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, GoHealth is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Marsh McLennan and GoHealth

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

The idea behind Marsh McLennan Companies and GoHealth 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.