Correlation Between Hang Seng and AIA

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

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Can any of the company-specific risk be diversified away by investing in both Hang Seng and AIA at the same time? Although using correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combing Hang Seng and AIA into the same portfolio which is an essential part of fundamental portfolio management process.

Diversification Opportunities for Hang Seng and AIA

0.46
Correlation
HS
<div class='circular--portrait-small' style='font-weight: 700;background:#FF6600;color: #FFFAFA;font-size:0.9em;padding-top: 12px;;'>AIA</div>

Very weak diversification

The 3 months correlation between Hang Seng and AIA is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Hang Seng and AIA in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on AIA and Hang Seng 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 Hang Seng are associated (or correlated) with AIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIA has no effect on the direction of Hang Seng i.e. Hang Seng and AIA go up and down completely randomly.
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Pair Corralation between Hang Seng and AIA

Given the investment horizon of 30 days, Hang Seng is expected to under-perform the AIA. But the index apears to be less risky and, when comparing its historical volatility, Hang Seng is 1.48 times less risky than AIA. The index trades about -0.09 of its potential returns per unit of risk. The AIA is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  7,690  in AIA on April 28, 2020 and sell it today you would lose (625.00)  from holding AIA or give up 8.13% of portfolio value over 30 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy65.57%
ValuesDaily Returns

Hang Seng  vs.  AIA

 Performance (%) 
      Timeline 
 Predicted Return Density 
      Returns 
Check out your portfolio center. Please also try Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.


 
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