Correlation Between AIA Group and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both AIA Group and Prudential Financial 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 Prudential Financial 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 Prudential Financial, you can compare the effects of market volatilities on AIA Group and Prudential Financial 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 Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIA Group and Prudential Financial.
Diversification Opportunities for AIA Group and Prudential Financial
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AIA and Prudential is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding AIA Group Limited and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial 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 Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of AIA Group i.e., AIA Group and Prudential Financial go up and down completely randomly.
Pair Corralation between AIA Group and Prudential Financial
Assuming the 90 days horizon AIA Group Limited is expected to generate 1.52 times more return on investment than Prudential Financial. However, AIA Group is 1.52 times more volatile than Prudential Financial. It trades about 0.09 of its potential returns per unit of risk. Prudential Financial is currently generating about -0.09 per unit of risk. If you would invest 665.00 in AIA Group Limited on November 28, 2024 and sell it today you would earn a total of 30.00 from holding AIA Group Limited or generate 4.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AIA Group Limited vs. Prudential Financial
Performance |
| Timeline |
| AIA Group Limited |
| Prudential Financial |
AIA Group and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AIA Group and Prudential Financial
The main advantage of trading using opposite AIA Group and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIA Group position performs unexpectedly, Prudential Financial 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 Prudential Financial will offset losses from the drop in Prudential Financial's long position.| AIA Group vs. Chiba Bank | AIA Group vs. PT Bank Maybank | AIA Group vs. BioNTech SE | AIA Group vs. Allegheny Technologies Incorporated |
| Prudential Financial vs. Monster Beverage Corp | Prudential Financial vs. Sunstone Hotel Investors | Prudential Financial vs. CanSino Biologics | Prudential Financial vs. NH HOTEL GROUP |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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