Correlation Between Ping An and AIA Group

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

Diversification Opportunities for Ping An and AIA Group

0.86

Correlation Coefficient

Ping An  AIA Group

Very poor diversification

The 3 months correlation between Ping and AIA is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Ping An Insurance and AIA Group Ltd 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 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 Ping An i.e., Ping An and AIA Group go up and down completely randomly.

Pair Corralation between Ping An and AIA Group

Assuming the 90 days horizon Ping An Insurance is expected to generate 1.51 times more return on investment than AIA Group. However, Ping An is 1.51 times more volatile than AIA Group Ltd. It trades about 0.07 of its potential returns per unit of risk. AIA Group Ltd is currently generating about 0.01 per unit of risk. If you would invest  923.00  in Ping An Insurance on September 5, 2024 and sell it today you would earn a total of  250.00  from holding Ping An Insurance or generate 27.09% return on investment over 90 days.

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

Ping An Insurance  vs.  AIA Group Ltd

Ping An Insurance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ping An Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Ping An showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Ping An and AIA Group

The main advantage of trading using opposite Ping An and AIA Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ping An 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 Ping An Insurance 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.