Correlation Between China Life and FG Annuities
Can any of the company-specific risk be diversified away by investing in both China Life and FG Annuities 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 China Life and FG Annuities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Life Insurance and FG Annuities Life, you can compare the effects of market volatilities on China Life and FG Annuities 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 China Life with a short position of FG Annuities. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Life and FG Annuities.
Diversification Opportunities for China Life and FG Annuities
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and FG Annuities is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding China Life Insurance and FG Annuities Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FG Annuities Life and China Life 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 China Life Insurance are associated (or correlated) with FG Annuities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FG Annuities Life has no effect on the direction of China Life i.e., China Life and FG Annuities go up and down completely randomly.
Pair Corralation between China Life and FG Annuities
Assuming the 90 days horizon China Life Insurance is expected to under-perform the FG Annuities. In addition to that, China Life is 1.0 times more volatile than FG Annuities Life. It trades about -0.04 of its total potential returns per unit of risk. FG Annuities Life is currently generating about 0.13 per unit of volatility. If you would invest 4,264 in FG Annuities Life on August 24, 2024 and sell it today you would earn a total of 446.00 from holding FG Annuities Life or generate 10.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Life Insurance vs. FG Annuities Life
Performance |
| Timeline |
| China Life Insurance |
| FG Annuities Life |
China Life and FG Annuities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Life and FG Annuities
The main advantage of trading using opposite China Life and FG Annuities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Life position performs unexpectedly, FG Annuities 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 FG Annuities will offset losses from the drop in FG Annuities' long position.| China Life vs. CNO Financial Group | China Life vs. Ping An Insurance | China Life vs. Lincoln National | China Life vs. AIA Group Ltd |
| FG Annuities vs. Manulife Financial Corp | FG Annuities vs. Brighthouse Financial | FG Annuities 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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