Correlation Between BMO Concentrated and Manulife Global

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

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

Diversification Opportunities for BMO Concentrated and Manulife Global

0.8

Correlation Coefficient

BMO Concentrated  Manulife Global

Very poor diversification

The 3 months correlation between BMO and Manulife is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding BMO Concentrated Global 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 BMO Concentrated 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 BMO Concentrated Global 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 BMO Concentrated i.e., BMO Concentrated and Manulife Global go up and down completely randomly.

Pair Corralation between BMO Concentrated and Manulife Global

Assuming the 90 days trading horizon BMO Concentrated Global is expected to under-perform the Manulife Global. In addition to that, BMO Concentrated is 1.14 times more volatile than Manulife Global Equity. It trades about 0.0 of its total potential returns per unit of risk. Manulife Global Equity is currently generating about 0.02 per unit of volatility. If you would invest  5,310  in Manulife Global Equity on November 29, 2024 and sell it today you would earn a total of  36.00  from holding Manulife Global Equity or generate 0.68% return on investment over 90 days.

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

BMO Concentrated Global  vs.  Manulife Global Equity

BMO Concentrated Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days BMO Concentrated Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound fundamental indicators, BMO Concentrated is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Manulife Global Equity

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Global Equity are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Manulife Global is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BMO Concentrated and Manulife Global

The main advantage of trading using opposite BMO Concentrated and Manulife Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO Concentrated 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 BMO Concentrated Global 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.