Correlation Between Ping An and AIA

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

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

Diversification Opportunities for Ping An and AIA

0.76

Correlation Coefficient

Ping An  AIA

Poor diversification

The 3 months correlation between Ping and AIA is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and AIA Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIA Group and Ping An 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 Ping An Insurance are associated (or correlated) with AIA. 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 Ping An i.e., Ping An and AIA go up and down completely randomly.

Pair Corralation between Ping An and AIA

Assuming the 90 days horizon Ping An is expected to generate 1.71 times less return on investment than AIA. But when comparing it to its historical volatility, Ping An Insurance is 1.69 times less risky than AIA. It trades about 0.04 of its potential returns per unit of risk. AIA Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  728.00  in AIA Group on December 27, 2024 and sell it today you would earn a total of  26.00  from holding AIA Group or generate 3.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.33%
Values	Daily Returns

Ping An Insurance  vs.  AIA Group

Ping An Insurance

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ping An Insurance are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, Ping An may actually be approaching a critical reversion point that can send shares even higher in April 2025.

AIA Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AIA Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, AIA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Ping An and AIA

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

The idea behind Ping An Insurance and AIA Group 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.