Correlation Between Crawford and Marsh McLennan

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

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

Diversification Opportunities for Crawford and Marsh McLennan

-0.25

Correlation Coefficient

Crawford  Marsh McLennan

Very good diversification

The 3 months correlation between Crawford and Marsh is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Crawford Company and Marsh McLennan Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marsh McLennan Companies and Crawford 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 Crawford Company are associated (or correlated) with Marsh McLennan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marsh McLennan Companies has no effect on the direction of Crawford i.e., Crawford and Marsh McLennan go up and down completely randomly.

Pair Corralation between Crawford and Marsh McLennan

Assuming the 90 days horizon Crawford is expected to generate 1.57 times less return on investment than Marsh McLennan. In addition to that, Crawford is 2.35 times more volatile than Marsh McLennan Companies. It trades about 0.07 of its total potential returns per unit of risk. Marsh McLennan Companies is currently generating about 0.26 per unit of volatility. If you would invest  22,169  in Marsh McLennan Companies on August 30, 2024 and sell it today you would earn a total of  1,155  from holding Marsh McLennan Companies or generate 5.21% return on investment over 90 days.

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

Crawford Company  vs.  Marsh McLennan Companies

Crawford

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Crawford Company are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Crawford may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Marsh McLennan Companies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Marsh McLennan Companies are ranked lower than 4 (%) 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.

Pair Trading with Crawford and Marsh McLennan

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

The idea behind Crawford Company and Marsh McLennan Companies 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.