Correlation Between CDSPI Canadian and Manulife Dividend

Can any of the company-specific risk be diversified away by investing in both CDSPI Canadian and Manulife Dividend 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 CDSPI Canadian and Manulife Dividend into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CDSPI Canadian Equity and Manulife Dividend Income, you can compare the effects of market volatilities on CDSPI Canadian and Manulife Dividend 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 CDSPI Canadian with a short position of Manulife Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDSPI Canadian and Manulife Dividend.

Diversification Opportunities for CDSPI Canadian and Manulife Dividend

0.62

Correlation Coefficient

CDSPI Canadian  Manulife Dividend

Poor diversification

The 3 months correlation between CDSPI and Manulife is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding CDSPI Canadian Equity and Manulife Dividend Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Dividend Income and CDSPI Canadian 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 CDSPI Canadian Equity are associated (or correlated) with Manulife Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Dividend Income has no effect on the direction of CDSPI Canadian i.e., CDSPI Canadian and Manulife Dividend go up and down completely randomly.

Pair Corralation between CDSPI Canadian and Manulife Dividend

Assuming the 90 days trading horizon CDSPI Canadian Equity is expected to generate 0.45 times more return on investment than Manulife Dividend. However, CDSPI Canadian Equity is 2.23 times less risky than Manulife Dividend. It trades about 0.05 of its potential returns per unit of risk. Manulife Dividend Income is currently generating about -0.09 per unit of risk. If you would invest  4,809  in CDSPI Canadian Equity on October 25, 2024 and sell it today you would earn a total of  84.00  from holding CDSPI Canadian Equity or generate 1.75% return on investment over 90 days.

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

CDSPI Canadian Equity  vs.  Manulife Dividend Income

CDSPI Canadian Equity

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CDSPI Canadian Equity are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, CDSPI Canadian is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Manulife Dividend Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Manulife Dividend Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest uncertain performance, the Fund's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with CDSPI Canadian and Manulife Dividend

The main advantage of trading using opposite CDSPI Canadian and Manulife Dividend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDSPI Canadian position performs unexpectedly, Manulife Dividend 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 Manulife Dividend will offset losses from the drop in Manulife Dividend's long position.

The idea behind CDSPI Canadian Equity and Manulife Dividend Income 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.