Correlation Between Marsh Mclennan and Allena Pharmaceuticals

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

Diversification Opportunities for Marsh Mclennan and Allena Pharmaceuticals

-0.12
  Correlation Coefficient

Good diversification

The 3 months correlation between Marsh and Allena is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Marsh Mclennan Companies and Allena Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allena Pharmaceuticals and Marsh Mclennan 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 Marsh Mclennan Companies are associated (or correlated) with Allena Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allena Pharmaceuticals has no effect on the direction of Marsh Mclennan i.e., Marsh Mclennan and Allena Pharmaceuticals go up and down completely randomly.

Pair Corralation between Marsh Mclennan and Allena Pharmaceuticals

Considering the 90-day investment horizon Marsh Mclennan Companies is expected to generate 0.14 times more return on investment than Allena Pharmaceuticals. However, Marsh Mclennan Companies is 6.93 times less risky than Allena Pharmaceuticals. It trades about 0.06 of its potential returns per unit of risk. Allena Pharmaceuticals is currently generating about -0.01 per unit of risk. If you would invest  11,353  in Marsh Mclennan Companies on May 10, 2022 and sell it today you would earn a total of  5,207  from holding Marsh Mclennan Companies or generate 45.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Marsh Mclennan Companies  vs.  Allena Pharmaceuticals

 Performance (%) 
       Timeline  
Marsh Mclennan Companies 
Marsh Performance
4 of 100
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. Despite somewhat strong primary indicators, Marsh Mclennan is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Marsh Price Channel

Allena Pharmaceuticals 
Allena Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Allena Pharmaceuticals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Allena Pharmaceuticals sustained solid returns over the last few months and may actually be approaching a breakup point.

Allena Price Channel

Marsh Mclennan and Allena Pharmaceuticals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Marsh Mclennan and Allena Pharmaceuticals

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

Allena Pharmaceuticals

Pair trading matchups for Allena Pharmaceuticals

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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