Correlation Between Great-West Lifeco and AIA Group

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

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

Diversification Opportunities for Great-West Lifeco and AIA Group

-0.5

Correlation Coefficient

Great-West Lifeco  AIA Group

Very good diversification

The 3 months correlation between Great-West and AIA is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Great West Lifeco and AIA Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIA Group Limited and Great-West Lifeco 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 Great West Lifeco 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 Limited has no effect on the direction of Great-West Lifeco i.e., Great-West Lifeco and AIA Group go up and down completely randomly.

Pair Corralation between Great-West Lifeco and AIA Group

Assuming the 90 days horizon Great West Lifeco is expected to under-perform the AIA Group. But the stock apears to be less risky and, when comparing its historical volatility, Great West Lifeco is 1.74 times less risky than AIA Group. The stock trades about 0.0 of its potential returns per unit of risk. The AIA Group Limited is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  593.00  in AIA Group Limited on April 20, 2025 and sell it today you would earn a total of  158.00  from holding AIA Group Limited or generate 26.64% return on investment over 90 days.

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

Great West Lifeco  vs.  AIA Group Limited

Great West Lifeco

Risk-Adjusted Performance

Very Weak

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

AIA Group Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AIA Group Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AIA Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Great-West Lifeco and AIA Group

The main advantage of trading using opposite Great-West Lifeco and AIA Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great-West Lifeco 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 Great West Lifeco and AIA Group Limited 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.