Correlation Between AIA Group and American Equity

Can any of the company-specific risk be diversified away by investing in both AIA Group and American Equity 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 American Equity 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 American Equity Investment, you can compare the effects of market volatilities on AIA Group and American Equity 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 American Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIA Group and American Equity.

Diversification Opportunities for AIA Group and American Equity

-0.52

Correlation Coefficient

AIA Group  American Equity

Excellent diversification

The 3 months correlation between AIA and American is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding AIA Group Ltd and American Equity Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Equity Inve 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 American Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Equity Inve has no effect on the direction of AIA Group i.e., AIA Group and American Equity go up and down completely randomly.

Pair Corralation between AIA Group and American Equity

If you would invest  2,811  in AIA Group Ltd on September 18, 2024 and sell it today you would earn a total of  9.00  from holding AIA Group Ltd or generate 0.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

AIA Group Ltd  vs.  American Equity Investment

AIA Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AIA Group Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, AIA Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Equity Inve

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with AIA Group and American Equity

The main advantage of trading using opposite AIA Group and American Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIA Group position performs unexpectedly, American Equity 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 American Equity will offset losses from the drop in American Equity's long position.

The idea behind AIA Group Ltd and American Equity Investment 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.