Correlation Between Aon PLC and Abacus Life

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

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

Diversification Opportunities for Aon PLC and Abacus Life

-0.59

Correlation Coefficient

Aon PLC  Abacus Life

Excellent diversification

The 3 months correlation between Aon and Abacus is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Aon PLC and Abacus Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abacus Life and Aon PLC 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 Aon PLC are associated (or correlated) with Abacus Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abacus Life has no effect on the direction of Aon PLC i.e., Aon PLC and Abacus Life go up and down completely randomly.

Pair Corralation between Aon PLC and Abacus Life

Considering the 90-day investment horizon Aon PLC is expected to generate 0.39 times more return on investment than Abacus Life. However, Aon PLC is 2.54 times less risky than Abacus Life. It trades about 0.06 of its potential returns per unit of risk. Abacus Life is currently generating about -0.14 per unit of risk. If you would invest  34,703  in Aon PLC on September 27, 2024 and sell it today you would earn a total of  1,458  from holding Aon PLC or generate 4.2% return on investment over 90 days.

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

Aon PLC  vs.  Abacus Life

Aon PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aon PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Aon PLC is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Abacus Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Abacus Life has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Aon PLC and Abacus Life

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

The idea behind Aon PLC and Abacus Life 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.