Correlation Between Techtronic Industries and AIA Group
Can any of the company-specific risk be diversified away by investing in both Techtronic Industries 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 Techtronic Industries and AIA Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Techtronic Industries and AIA Group Ltd, you can compare the effects of market volatilities on Techtronic Industries 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 Techtronic Industries with a short position of AIA Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Techtronic Industries and AIA Group.
Diversification Opportunities for Techtronic Industries and AIA Group
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Techtronic and AIA is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Techtronic Industries and AIA Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIA Group and Techtronic Industries 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 Techtronic Industries 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 Techtronic Industries i.e., Techtronic Industries and AIA Group go up and down completely randomly.
Pair Corralation between Techtronic Industries and AIA Group
Assuming the 90 days horizon Techtronic Industries is expected to generate 1.15 times more return on investment than AIA Group. However, Techtronic Industries is 1.15 times more volatile than AIA Group Ltd. It trades about -0.19 of its potential returns per unit of risk. AIA Group Ltd is currently generating about -0.29 per unit of risk. If you would invest 1,465 in Techtronic Industries on August 28, 2024 and sell it today you would lose (112.00) from holding Techtronic Industries or give up 7.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Techtronic Industries vs. AIA Group Ltd
Performance |
| Timeline |
| Techtronic Industries |
| AIA Group |
Techtronic Industries and AIA Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Techtronic Industries and AIA Group
The main advantage of trading using opposite Techtronic Industries and AIA Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Techtronic Industries 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.| Techtronic Industries vs. Techtronic Industries Ltd | Techtronic Industries vs. SMC Corp | Techtronic Industries vs. Epiroc AB | Techtronic Industries vs. ABB |
| AIA Group vs. Atlantic American | AIA Group vs. Ping An Insurance | AIA Group vs. China Life Insurance | AIA Group vs. Sanlam Ltd PK |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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