Correlation Between AIA Group and Makita Corp

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

Diversification Opportunities for AIA Group and Makita Corp

0.0

Correlation Coefficient

AIA Group  Makita Corp

Pay attention - limited upside

The 3 months correlation between AIA and Makita is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding AIA Group Ltd and Makita Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Makita Corp 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 Makita Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Makita Corp has no effect on the direction of AIA Group i.e., AIA Group and Makita Corp go up and down completely randomly.

Pair Corralation between AIA Group and Makita Corp

If you would invest  2,901  in AIA Group Ltd on December 28, 2024 and sell it today you would earn a total of  209.00  from holding AIA Group Ltd or generate 7.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

AIA Group Ltd  vs.  Makita Corp

AIA Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AIA Group Ltd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, AIA Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Makita Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Makita Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Makita Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AIA Group and Makita Corp

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

The idea behind AIA Group Ltd and Makita Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.