Correlation Between AIA Group and MetLife

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

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

Diversification Opportunities for AIA Group and MetLife

0.07

Correlation Coefficient

AIA Group  MetLife

Significant diversification

The 3 months correlation between AIA and MetLife is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding AIA Group Ltd and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife and AIA Group 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 AIA Group Ltd are associated (or correlated) with MetLife. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MetLife has no effect on the direction of AIA Group i.e., AIA Group and MetLife go up and down completely randomly.

Pair Corralation between AIA Group and MetLife

Assuming the 90 days horizon AIA Group is expected to generate 1.61 times less return on investment than MetLife. In addition to that, AIA Group is 1.63 times more volatile than MetLife. It trades about 0.03 of its total potential returns per unit of risk. MetLife is currently generating about 0.08 per unit of volatility. If you would invest  7,684  in MetLife on September 14, 2024 and sell it today you would earn a total of  615.00  from holding MetLife or generate 8.0% return on investment over 90 days.

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

AIA Group Ltd  vs.  MetLife

AIA Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AIA Group Ltd are ranked lower than 2 (%) 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.

MetLife

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MetLife are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, MetLife may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with AIA Group and MetLife

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

The idea behind AIA Group Ltd and MetLife 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.