Correlation Between Ayala Land and Manulife Financial

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

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

Diversification Opportunities for Ayala Land and Manulife Financial

-0.81

Correlation Coefficient

Ayala Land  Manulife Financial

Pay attention - limited upside

The 3 months correlation between Ayala and Manulife is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ayala Land and Manulife Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Financial Corp and Ayala Land 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 Ayala Land are associated (or correlated) with Manulife Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Financial Corp has no effect on the direction of Ayala Land i.e., Ayala Land and Manulife Financial go up and down completely randomly.

Pair Corralation between Ayala Land and Manulife Financial

Assuming the 90 days trading horizon Ayala Land is expected to under-perform the Manulife Financial. But the stock apears to be less risky and, when comparing its historical volatility, Ayala Land is 2.68 times less risky than Manulife Financial. The stock trades about -0.29 of its potential returns per unit of risk. The Manulife Financial Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  176,336  in Manulife Financial Corp on August 31, 2024 and sell it today you would earn a total of  18,664  from holding Manulife Financial Corp or generate 10.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	71.43%
Values	Daily Returns

Ayala Land  vs.  Manulife Financial Corp

Ayala Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ayala Land has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Manulife Financial Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Manulife Financial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ayala Land and Manulife Financial

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

The idea behind Ayala Land and Manulife Financial Corp 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.