Correlation Between Aon PLC and BancFirst

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Can any of the company-specific risk be diversified away by investing in both Aon PLC and BancFirst 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 BancFirst into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aon PLC and BancFirst, you can compare the effects of market volatilities on Aon PLC and BancFirst 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 BancFirst. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aon PLC and BancFirst.

Diversification Opportunities for Aon PLC and BancFirst

-0.76
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Aon and BancFirst is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Aon PLC and BancFirst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BancFirst 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 BancFirst. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BancFirst has no effect on the direction of Aon PLC i.e., Aon PLC and BancFirst go up and down completely randomly.

Pair Corralation between Aon PLC and BancFirst

Considering the 90-day investment horizon Aon PLC is expected to generate 0.31 times more return on investment than BancFirst. However, Aon PLC is 3.21 times less risky than BancFirst. It trades about 0.51 of its potential returns per unit of risk. BancFirst is currently generating about 0.02 per unit of risk. If you would invest  31,539  in Aon PLC on December 29, 2023 and sell it today you would earn a total of  1,840  from holding Aon PLC or generate 5.83% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Aon PLC  vs.  BancFirst

 Performance 
       Timeline  
Aon PLC 

Risk-Adjusted Performance

18 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Aon PLC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Aon PLC displayed solid returns over the last few months and may actually be approaching a breakup point.
BancFirst 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days BancFirst has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating 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 and BancFirst Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aon PLC and BancFirst

The main advantage of trading using opposite Aon PLC and BancFirst positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aon PLC position performs unexpectedly, BancFirst 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 BancFirst will offset losses from the drop in BancFirst's long position.
The idea behind Aon PLC and BancFirst 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.
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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