Correlation Between AIA Group and American Equity
Can any of the company-specific risk be diversified away by investing in both AIA Group and American Equity 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 American Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AIA Group Ltd and American Equity Investment, you can compare the effects of market volatilities on AIA Group and American Equity 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 American Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIA Group and American Equity.
Diversification Opportunities for AIA Group and American Equity
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between AIA and American is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding AIA Group Ltd and American Equity Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Equity Inve 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 Ltd are associated (or correlated) with American Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Equity Inve has no effect on the direction of AIA Group i.e., AIA Group and American Equity go up and down completely randomly.
Pair Corralation between AIA Group and American Equity
Assuming the 90 days horizon AIA Group Ltd is expected to under-perform the American Equity. But the pink sheet apears to be less risky and, when comparing its historical volatility, AIA Group Ltd is 1.35 times less risky than American Equity. The pink sheet trades about -0.02 of its potential returns per unit of risk. The American Equity Investment is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,900 in American Equity Investment on August 28, 2024 and sell it today you would earn a total of 1,475 from holding American Equity Investment or generate 37.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 31.72% |
| Values | Daily Returns |
AIA Group Ltd vs. American Equity Investment
Performance |
| Timeline |
| AIA Group |
| American Equity Inve |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
AIA Group and American Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AIA Group and American Equity
The main advantage of trading using opposite AIA Group and American Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIA Group position performs unexpectedly, American Equity 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 American Equity will offset losses from the drop in American Equity's long position.| AIA Group vs. CNO Financial Group | AIA Group vs. Genworth Financial | AIA Group vs. MetLife Preferred Stock | AIA Group vs. Prudential Public Limited |
| American Equity vs. MetLife Preferred Stock | American Equity vs. Prudential Public Limited | American Equity vs. MetLife Preferred Stock | American Equity vs. Jackson Financial |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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