Correlation Between ÖKOWORLD and Aon PLC

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

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

Diversification Opportunities for ÖKOWORLD and Aon PLC

-0.47

Correlation Coefficient

ÖKOWORLD  Aon PLC

Very good diversification

The 3 months correlation between ÖKOWORLD and Aon is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding KOWORLD AG and Aon PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aon PLC and ÖKOWORLD 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 KOWORLD AG 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 ÖKOWORLD i.e., ÖKOWORLD and Aon PLC go up and down completely randomly.

Pair Corralation between ÖKOWORLD and Aon PLC

Assuming the 90 days trading horizon KOWORLD AG is expected to generate 1.23 times more return on investment than Aon PLC. However, ÖKOWORLD is 1.23 times more volatile than Aon PLC. It trades about 0.13 of its potential returns per unit of risk. Aon PLC is currently generating about 0.04 per unit of risk. If you would invest  2,860  in KOWORLD AG on October 15, 2024 and sell it today you would earn a total of  70.00  from holding KOWORLD AG or generate 2.45% return on investment over 90 days.

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

KOWORLD AG  vs.  Aon PLC

KOWORLD AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KOWORLD AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Aon PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aon PLC are ranked lower than 5 (%) 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 ÖKOWORLD and Aon PLC

The main advantage of trading using opposite ÖKOWORLD and Aon PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ÖKOWORLD 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 KOWORLD AG 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.