Correlation Between Willis Towers and Service International
Can any of the company-specific risk be diversified away by investing in both Willis Towers and Service International 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 Willis Towers and Service International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Willis Towers Watson and Service International, you can compare the effects of market volatilities on Willis Towers and Service International 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 Willis Towers with a short position of Service International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Willis Towers and Service International.
Diversification Opportunities for Willis Towers and Service International
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Willis and Service is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Willis Towers Watson and Service International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Service International and Willis Towers 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 Willis Towers Watson are associated (or correlated) with Service International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Service International has no effect on the direction of Willis Towers i.e., Willis Towers and Service International go up and down completely randomly.
Pair Corralation between Willis Towers and Service International
Considering the 90-day investment horizon Willis Towers Watson is expected to generate 1.09 times more return on investment than Service International. However, Willis Towers is 1.09 times more volatile than Service International. It trades about -0.2 of its potential returns per unit of risk. Service International is currently generating about -0.42 per unit of risk. If you would invest 27,383 in Willis Towers Watson on January 20, 2024 and sell it today you would lose (1,084) from holding Willis Towers Watson or give up 3.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Willis Towers Watson vs. Service International
Performance |
| Timeline |
| Willis Towers Watson |
| Service International |
Willis Towers and Service International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Willis Towers and Service International
The main advantage of trading using opposite Willis Towers and Service International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willis Towers position performs unexpectedly, Service International 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 Service International will offset losses from the drop in Service International's long position.| Willis Towers vs. Marsh McLennan Companies | Willis Towers vs. Arthur J Gallagher | Willis Towers vs. Brown Brown | Willis Towers vs. Erie Indemnity |
| Service International vs. Rollins | Service International vs. MEDIFAST INC | Service International vs. Smart Share Global |
Check out your portfolio center.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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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