Correlation Between AIA Group and Manulife Financial
Can any of the company-specific risk be diversified away by investing in both AIA Group and Manulife 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 Manulife Financial 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 Manulife Financial, you can compare the effects of market volatilities on AIA Group and Manulife 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 Manulife Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIA Group and Manulife Financial.
Diversification Opportunities for AIA Group and Manulife Financial
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between AIA and Manulife is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding AIA Group Ltd and Manulife Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife 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 Ltd are associated (or correlated) with Manulife Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Financial has no effect on the direction of AIA Group i.e., AIA Group and Manulife Financial go up and down completely randomly.
Pair Corralation between AIA Group and Manulife Financial
Assuming the 90 days horizon AIA Group Ltd is expected to under-perform the Manulife Financial. In addition to that, AIA Group is 4.71 times more volatile than Manulife Financial. It trades about -0.3 of its total potential returns per unit of risk. Manulife Financial is currently generating about 0.22 per unit of volatility. If you would invest 1,377 in Manulife Financial on August 28, 2024 and sell it today you would earn a total of 23.00 from holding Manulife Financial or generate 1.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AIA Group Ltd vs. Manulife Financial
Performance |
| Timeline |
| AIA Group |
| Manulife Financial |
AIA Group and Manulife Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AIA Group and Manulife Financial
The main advantage of trading using opposite AIA Group and Manulife Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIA Group position performs unexpectedly, Manulife 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 Manulife Financial will offset losses from the drop in Manulife Financial'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 |
| Manulife Financial vs. CNO Financial Group | Manulife Financial vs. Genworth Financial | Manulife Financial vs. MetLife Preferred Stock | Manulife Financial 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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