Correlation Between AIA Group and Sanlam

Can any of the company-specific risk be diversified away by investing in both AIA Group and Sanlam 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 Sanlam 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 Sanlam Ltd PK, you can compare the effects of market volatilities on AIA Group and Sanlam 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 Sanlam. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIA Group and Sanlam.

Diversification Opportunities for AIA Group and Sanlam

0.44

Correlation Coefficient

AIA Group  Sanlam

Very weak diversification

The 3 months correlation between AIA and Sanlam is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding AIA Group Ltd and Sanlam Ltd PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanlam Ltd PK 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 Sanlam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanlam Ltd PK has no effect on the direction of AIA Group i.e., AIA Group and Sanlam go up and down completely randomly.

Pair Corralation between AIA Group and Sanlam

Assuming the 90 days horizon AIA Group Ltd is expected to under-perform the Sanlam. In addition to that, AIA Group is 1.12 times more volatile than Sanlam Ltd PK. It trades about -0.18 of its total potential returns per unit of risk. Sanlam Ltd PK is currently generating about -0.08 per unit of volatility. If you would invest  1,016  in Sanlam Ltd PK on September 5, 2024 and sell it today you would lose (29.00) from holding Sanlam Ltd PK or give up 2.85% of portfolio value over 90 days.

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

AIA Group Ltd  vs.  Sanlam Ltd PK

AIA Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AIA Group Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, AIA Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sanlam Ltd PK

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sanlam Ltd PK are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Sanlam is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AIA Group and Sanlam

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

The idea behind AIA Group Ltd and Sanlam Ltd PK 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.