Correlation Between AIA Group and China Mobile
Can any of the company-specific risk be diversified away by investing in both AIA Group and China Mobile 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 AIA Group and China Mobile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AIA Group Limited and China Life Insurance, you can compare the effects of market volatilities on AIA Group and China Mobile 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 AIA Group with a short position of China Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIA Group and China Mobile.
Diversification Opportunities for AIA Group and China Mobile
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AIA and China is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding AIA Group Limited and China Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Life Insurance and AIA 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 AIA Group Limited are associated (or correlated) with China Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Life Insurance has no effect on the direction of AIA Group i.e., AIA Group and China Mobile go up and down completely randomly.
Pair Corralation between AIA Group and China Mobile
Assuming the 90 days horizon AIA Group Limited is expected to under-perform the China Mobile. But the stock apears to be less risky and, when comparing its historical volatility, AIA Group Limited is 2.53 times less risky than China Mobile. The stock trades about -0.09 of its potential returns per unit of risk. The China Life Insurance is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 172.00 in China Life Insurance on September 2, 2024 and sell it today you would earn a total of 3.00 from holding China Life Insurance or generate 1.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AIA Group Limited vs. China Life Insurance
Performance |
| Timeline |
| AIA Group Limited |
| China Life Insurance |
AIA Group and China Mobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AIA Group and China Mobile
The main advantage of trading using opposite AIA Group and China Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIA Group position performs unexpectedly, China Mobile 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 China Mobile will offset losses from the drop in China Mobile's long position.The idea behind AIA Group Limited and China Life Insurance 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.| China Mobile vs. Natural Health Trends | China Mobile vs. FEMALE HEALTH | China Mobile vs. Boyd Gaming | China Mobile vs. PENN NATL GAMING |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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