Correlation Between Brookfield Office and Manulife Financial

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

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

Diversification Opportunities for Brookfield Office and Manulife Financial

0.81

Correlation Coefficient

Brookfield Office  Manulife Financial

Very poor diversification

The 3 months correlation between Brookfield and Manulife is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Office Properties 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 Brookfield Office 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 Brookfield Office Properties 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 Brookfield Office i.e., Brookfield Office and Manulife Financial go up and down completely randomly.

Pair Corralation between Brookfield Office and Manulife Financial

Assuming the 90 days trading horizon Brookfield Office is expected to generate 1.42 times less return on investment than Manulife Financial. In addition to that, Brookfield Office is 1.72 times more volatile than Manulife Financial Corp. It trades about 0.24 of its total potential returns per unit of risk. Manulife Financial Corp is currently generating about 0.6 per unit of volatility. If you would invest  1,684  in Manulife Financial Corp on October 26, 2024 and sell it today you would earn a total of  145.00  from holding Manulife Financial Corp or generate 8.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.0%
Values	Daily Returns

Brookfield Office Properties  vs.  Manulife Financial Corp

Brookfield Office

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Office Properties are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Brookfield Office may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Manulife Financial Corp

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial Corp are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal fundamental indicators, Manulife Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield Office and Manulife Financial

The main advantage of trading using opposite Brookfield Office and Manulife Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Office 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 Brookfield Office Properties 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.

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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 Managers module to screen money managers from public funds and ETFs managed around the world.