Correlation Between Manulife Financial and AIA Group

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

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

Diversification Opportunities for Manulife Financial and AIA Group

0.27

Correlation Coefficient

Manulife Financial  AIA Group

Modest diversification

The 3 months correlation between Manulife and AIA is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial and AIA Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIA Group and Manulife Financial 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 Manulife Financial 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 Manulife Financial i.e., Manulife Financial and AIA Group go up and down completely randomly.

Pair Corralation between Manulife Financial and AIA Group

Assuming the 90 days horizon Manulife Financial is expected to under-perform the AIA Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, Manulife Financial is 1.04 times less risky than AIA Group. The pink sheet trades about -0.15 of its potential returns per unit of risk. The AIA Group Ltd is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  2,916  in AIA Group Ltd on September 20, 2024 and sell it today you would lose (119.00) from holding AIA Group Ltd or give up 4.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Manulife Financial  vs.  AIA Group Ltd

Manulife Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Manulife Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Manulife Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

AIA Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIA Group Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, AIA Group is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Manulife Financial and AIA Group

The main advantage of trading using opposite Manulife Financial and AIA Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Manulife Financial 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 Manulife Financial 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 Commodity Directory module to find actively traded commodities issued by global exchanges.