Correlation Between SMC Corp and AIA Group
Can any of the company-specific risk be diversified away by investing in both SMC Corp and AIA Group 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 SMC Corp and AIA Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SMC Corp Japan and AIA Group Ltd, you can compare the effects of market volatilities on SMC Corp and AIA Group 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 SMC Corp with a short position of AIA Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMC Corp and AIA Group.
Diversification Opportunities for SMC Corp and AIA Group
Modest diversification
The 3 months correlation between SMC and AIA is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding SMC Corp Japan and AIA Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIA Group and SMC Corp 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 SMC Corp Japan are associated (or correlated) with AIA Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIA Group has no effect on the direction of SMC Corp i.e., SMC Corp and AIA Group go up and down completely randomly.
Pair Corralation between SMC Corp and AIA Group
Assuming the 90 days horizon SMC Corp Japan is expected to under-perform the AIA Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, SMC Corp Japan is 1.24 times less risky than AIA Group. The pink sheet trades about -0.02 of its potential returns per unit of risk. The AIA Group Ltd is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,795 in AIA Group Ltd on August 28, 2024 and sell it today you would earn a total of 119.00 from holding AIA Group Ltd or generate 4.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SMC Corp Japan vs. AIA Group Ltd
Performance |
| Timeline |
| SMC Corp Japan |
| AIA Group |
SMC Corp and AIA Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SMC Corp and AIA Group
The main advantage of trading using opposite SMC Corp and AIA Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMC Corp position performs unexpectedly, AIA Group 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 AIA Group will offset losses from the drop in AIA Group's long position.| SMC Corp vs. Schneider Electric SE | SMC Corp vs. Atlas Copco AB | SMC Corp vs. Fanuc | SMC Corp vs. Sandvik AB |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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