Correlation Between China Life and Jackson Financial

Can any of the company-specific risk be diversified away by investing in both China Life and Jackson Financial 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 China Life and Jackson Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Life Insurance and Jackson Financial, you can compare the effects of market volatilities on China Life and Jackson Financial 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 China Life with a short position of Jackson Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Life and Jackson Financial.

Diversification Opportunities for China Life and Jackson Financial

0.71

Correlation Coefficient

China Life  Jackson Financial

Poor diversification

The 3 months correlation between China and Jackson is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding China Life Insurance and Jackson Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jackson Financial and China Life 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 China Life Insurance are associated (or correlated) with Jackson Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jackson Financial has no effect on the direction of China Life i.e., China Life and Jackson Financial go up and down completely randomly.

Pair Corralation between China Life and Jackson Financial

Assuming the 90 days horizon China Life Insurance is expected to under-perform the Jackson Financial. In addition to that, China Life is 6.47 times more volatile than Jackson Financial. It trades about -0.04 of its total potential returns per unit of risk. Jackson Financial is currently generating about 0.03 per unit of volatility. If you would invest  2,678  in Jackson Financial on September 12, 2024 and sell it today you would earn a total of  7.00  from holding Jackson Financial or generate 0.26% return on investment over 90 days.

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

China Life Insurance  vs.  Jackson Financial

China Life Insurance

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Life Insurance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking indicators, China Life reported solid returns over the last few months and may actually be approaching a breakup point.

Jackson Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jackson Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Jackson Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Life and Jackson Financial

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

The idea behind China Life Insurance and Jackson Financial 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.