Correlation Between Makita Corp and AIA Group

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

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

Diversification Opportunities for Makita Corp and AIA Group

0.0

Correlation Coefficient

Makita Corp  AIA Group

Pay attention - limited upside

The 3 months correlation between Makita and AIA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Makita Corp and AIA Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIA Group and Makita Corp 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 Makita Corp 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 Makita Corp i.e., Makita Corp and AIA Group go up and down completely randomly.

Pair Corralation between Makita Corp and AIA Group

If you would invest  2,901  in AIA Group Ltd on December 28, 2024 and sell it today you would earn a total of  135.00  from holding AIA Group Ltd or generate 4.65% return on investment over 90 days.

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

Makita Corp  vs.  AIA Group Ltd

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.

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 4 (%) 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 Makita Corp and AIA Group

The main advantage of trading using opposite Makita Corp and AIA Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Makita Corp 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 Makita Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.