Correlation Between AIA Group and Husqvarna

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

Diversification Opportunities for AIA Group and Husqvarna

0.54

Correlation Coefficient

AIA Group  Husqvarna

Very weak diversification

The 3 months correlation between AIA and Husqvarna is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding AIA Group Ltd and Husqvarna AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Husqvarna AB 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 Husqvarna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Husqvarna AB has no effect on the direction of AIA Group i.e., AIA Group and Husqvarna go up and down completely randomly.

Pair Corralation between AIA Group and Husqvarna

Assuming the 90 days horizon AIA Group Ltd is expected to generate 0.95 times more return on investment than Husqvarna. However, AIA Group Ltd is 1.05 times less risky than Husqvarna. It trades about 0.01 of its potential returns per unit of risk. Husqvarna AB is currently generating about -0.09 per unit of risk. If you would invest  3,023  in AIA Group Ltd on September 3, 2024 and sell it today you would lose (13.00) from holding AIA Group Ltd or give up 0.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

AIA Group Ltd  vs.  Husqvarna AB

AIA Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AIA Group Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward indicators, AIA Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Husqvarna AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Husqvarna AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with AIA Group and Husqvarna

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

The idea behind AIA Group Ltd and Husqvarna AB 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.