Correlation Between AIA Group and China Life
Can any of the company-specific risk be diversified away by investing in both AIA Group and China Life 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 Life 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 China Life Insurance, you can compare the effects of market volatilities on AIA Group and China Life 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 Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIA Group and China Life.
Diversification Opportunities for AIA Group and China Life
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AIA and China is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding AIA Group Ltd 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 Ltd are associated (or correlated) with China Life. 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 Life go up and down completely randomly.
Pair Corralation between AIA Group and China Life
Assuming the 90 days horizon AIA Group Ltd is expected to under-perform the China Life. But the pink sheet apears to be less risky and, when comparing its historical volatility, AIA Group Ltd is 2.01 times less risky than China Life. The pink sheet trades about -0.3 of its potential returns per unit of risk. The China Life Insurance is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 213.00 in China Life Insurance on August 28, 2024 and sell it today you would lose (18.00) from holding China Life Insurance or give up 8.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AIA Group Ltd vs. China Life Insurance
Performance |
| Timeline |
| AIA Group |
| China Life Insurance |
AIA Group and China Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AIA Group and China Life
The main advantage of trading using opposite AIA Group and China Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIA Group position performs unexpectedly, China Life 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 Life will offset losses from the drop in China Life'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 |
| China Life vs. CNO Financial Group | China Life vs. Genworth Financial | China Life vs. MetLife Preferred Stock | China Life vs. Prudential Public Limited |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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