Correlation Between RBC Canadian and Manulife Global

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

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

Diversification Opportunities for RBC Canadian and Manulife Global

0.19

Correlation Coefficient

RBC Canadian  Manulife Global

Average diversification

The 3 months correlation between RBC and Manulife is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding RBC Canadian Equity and Manulife Global Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Global Equity and RBC 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 RBC Canadian Equity are associated (or correlated) with Manulife Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Global Equity has no effect on the direction of RBC Canadian i.e., RBC Canadian and Manulife Global go up and down completely randomly.

Pair Corralation between RBC Canadian and Manulife Global

Assuming the 90 days trading horizon RBC Canadian Equity is expected to generate 1.01 times more return on investment than Manulife Global. However, RBC Canadian is 1.01 times more volatile than Manulife Global Equity. It trades about -0.16 of its potential returns per unit of risk. Manulife Global Equity is currently generating about -0.27 per unit of risk. If you would invest  3,388  in RBC Canadian Equity on October 11, 2024 and sell it today you would lose (64.00) from holding RBC Canadian Equity or give up 1.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

RBC Canadian Equity  vs.  Manulife Global Equity

RBC Canadian Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RBC Canadian Equity has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, RBC Canadian is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Manulife Global Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Manulife Global Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy primary indicators, Manulife Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with RBC Canadian and Manulife Global

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

The idea behind RBC Canadian Equity and Manulife Global Equity 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.