Correlation Between American Equity and China Life

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Can any of the company-specific risk be diversified away by investing in both American Equity 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 American Equity and China Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Equity Investment and China Life Insurance, you can compare the effects of market volatilities on American Equity 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 American Equity with a short position of China Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Equity and China Life.

Diversification Opportunities for American Equity and China Life

0.51
  Correlation Coefficient

Very weak diversification

The 3 months correlation between American and China is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding American Equity Investment 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 American Equity 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 American Equity Investment 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 American Equity i.e., American Equity and China Life go up and down completely randomly.

Pair Corralation between American Equity and China Life

If you would invest  5,375  in American Equity Investment on August 31, 2024 and sell it today you would earn a total of  0.00  from holding American Equity Investment or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy4.55%
ValuesDaily Returns

American Equity Investment  vs.  China Life Insurance

 Performance 
       Timeline  
American Equity Inve 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days American Equity Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, American Equity is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.
China Life Insurance 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in China Life Insurance are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward-looking indicators, China Life reported solid returns over the last few months and may actually be approaching a breakup point.

American Equity and China Life Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Equity and China Life

The main advantage of trading using opposite American Equity and China Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Equity 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.
The idea behind American Equity Investment 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.
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 CEOs Directory module to screen CEOs from public companies around the world.

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