Correlation Between American Equity and AIA Group

Can any of the company-specific risk be diversified away by investing in both American Equity 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 American Equity and AIA Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Equity Investment and AIA Group Ltd, you can compare the effects of market volatilities on American Equity 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 American Equity with a short position of AIA Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Equity and AIA Group.

Diversification Opportunities for American Equity and AIA Group

-0.52

Correlation Coefficient

American Equity  AIA Group

Excellent diversification

The 3 months correlation between American and AIA is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding American Equity Investment and AIA Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIA Group and American Equity 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 American Equity Investment 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 American Equity i.e., American Equity and AIA Group go up and down completely randomly.

Pair Corralation between American Equity and AIA Group

Considering the 90-day investment horizon American Equity Investment is expected to generate 1.37 times more return on investment than AIA Group. However, American Equity is 1.37 times more volatile than AIA Group Ltd. It trades about 0.06 of its potential returns per unit of risk. AIA Group Ltd is currently generating about -0.03 per unit of risk. If you would invest  4,540  in American Equity Investment on September 18, 2024 and sell it today you would earn a total of  835.00  from holding American Equity Investment or generate 18.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	28.89%
Values	Daily Returns

American Equity Investment  vs.  AIA Group Ltd

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.

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.

Pair Trading with American Equity and AIA Group

The main advantage of trading using opposite American Equity and AIA Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Equity 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.

The idea behind American Equity Investment and AIA Group Ltd 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.