Correlation Between Techtronic Industries and AIA Group

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

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

Diversification Opportunities for Techtronic Industries and AIA Group

0.74

Correlation Coefficient

Techtronic Industries  AIA Group

Poor diversification

The 3 months correlation between Techtronic and AIA is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Techtronic Industries and AIA Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIA Group and Techtronic Industries 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 Techtronic Industries 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 Techtronic Industries i.e., Techtronic Industries and AIA Group go up and down completely randomly.

Pair Corralation between Techtronic Industries and AIA Group

Assuming the 90 days horizon Techtronic Industries is expected to generate 1.43 times more return on investment than AIA Group. However, Techtronic Industries is 1.43 times more volatile than AIA Group Ltd. It trades about -0.01 of its potential returns per unit of risk. AIA Group Ltd is currently generating about -0.05 per unit of risk. If you would invest  1,428  in Techtronic Industries on September 24, 2024 and sell it today you would lose (90.00) from holding Techtronic Industries or give up 6.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Techtronic Industries  vs.  AIA Group Ltd

Techtronic Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Techtronic Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Techtronic Industries is not utilizing all of its potentials. The current 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 latest unfluctuating performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Techtronic Industries and AIA Group

The main advantage of trading using opposite Techtronic Industries and AIA Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Techtronic Industries 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 Techtronic Industries 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.