Correlation Between Reinsurance Group and Aon PLC

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

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

Diversification Opportunities for Reinsurance Group and Aon PLC

-0.22

Correlation Coefficient

Reinsurance Group  Aon PLC

Very good diversification

The 3 months correlation between Reinsurance and Aon is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Reinsurance Group of and Aon PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aon PLC and Reinsurance Group 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 Reinsurance Group of 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 Reinsurance Group i.e., Reinsurance Group and Aon PLC go up and down completely randomly.

Pair Corralation between Reinsurance Group and Aon PLC

Considering the 90-day investment horizon Reinsurance Group of is expected to under-perform the Aon PLC. But the stock apears to be less risky and, when comparing its historical volatility, Reinsurance Group of is 3.53 times less risky than Aon PLC. The stock trades about -0.08 of its potential returns per unit of risk. The Aon PLC is currently generating about 0.06 of returns per unit of risk over similar time horizon. 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Reinsurance Group of  vs.  Aon PLC

Reinsurance Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reinsurance Group of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Reinsurance Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Reinsurance Group and Aon PLC

The main advantage of trading using opposite Reinsurance Group and Aon PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reinsurance Group 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 Reinsurance Group of 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..