Correlation Between FG Annuities and China Life

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

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

Diversification Opportunities for FG Annuities and China Life

-0.23

Correlation Coefficient

FG Annuities  China Life

Very good diversification

The 3 months correlation between FG Annuities and China is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding FG Annuities Life and China Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Life Insurance and FG Annuities 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 FG Annuities Life are associated (or correlated) with China Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Life Insurance has no effect on the direction of FG Annuities i.e., FG Annuities and China Life go up and down completely randomly.

Pair Corralation between FG Annuities and China Life

Allowing for the 90-day total investment horizon FG Annuities Life is expected to under-perform the China Life. In addition to that, FG Annuities is 1.25 times more volatile than China Life Insurance. It trades about -0.06 of its total potential returns per unit of risk. China Life Insurance is currently generating about 0.03 per unit of volatility. If you would invest  190.00  in China Life Insurance on December 30, 2024 and sell it today you would earn a total of  6.00  from holding China Life Insurance or generate 3.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

FG Annuities Life  vs.  China Life Insurance

FG Annuities Life

Risk-Adjusted Performance

Very Weak

Over the last 90 days FG Annuities Life has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

China Life Insurance

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Life Insurance are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking indicators, China Life is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with FG Annuities and China Life

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

The idea behind FG Annuities Life and China Life Insurance 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .