Correlation Between CHINA DISPLAY and AIA Group

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

By analyzing existing cross correlation between CHINA DISPLAY OTHHD 10 and AIA Group Limited, you can compare the effects of market volatilities on CHINA DISPLAY 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 CHINA DISPLAY with a short position of AIA Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA DISPLAY and AIA Group.

Diversification Opportunities for CHINA DISPLAY and AIA Group

0.25

Correlation Coefficient

CHINA DISPLAY  AIA Group

Modest diversification

The 3 months correlation between CHINA and AIA is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding CHINA DISPLAY OTHHD 10 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 CHINA DISPLAY 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 CHINA DISPLAY OTHHD 10 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 CHINA DISPLAY i.e., CHINA DISPLAY and AIA Group go up and down completely randomly.

Pair Corralation between CHINA DISPLAY and AIA Group

Assuming the 90 days trading horizon CHINA DISPLAY OTHHD 10 is expected to generate 2.34 times more return on investment than AIA Group. However, CHINA DISPLAY is 2.34 times more volatile than AIA Group Limited. It trades about 0.17 of its potential returns per unit of risk. AIA Group Limited is currently generating about 0.18 per unit of risk. If you would invest  1.70  in CHINA DISPLAY OTHHD 10 on April 22, 2025 and sell it today you would earn a total of  1.10  from holding CHINA DISPLAY OTHHD 10 or generate 64.71% return on investment over 90 days.

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

CHINA DISPLAY OTHHD 10  vs.  AIA Group Limited

CHINA DISPLAY OTHHD

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA DISPLAY OTHHD 10 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking indicators, CHINA DISPLAY reported solid returns over the last few months and may actually be approaching a breakup point.

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 13 (%) 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 CHINA DISPLAY and AIA Group

The main advantage of trading using opposite CHINA DISPLAY and AIA Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA DISPLAY 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 CHINA DISPLAY OTHHD 10 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.