Correlation Between Citigroup and Manulife Financial

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

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

Diversification Opportunities for Citigroup and Manulife Financial

0.45

Correlation Coefficient

Citigroup  Manulife Financial

Very weak diversification

The 3 months correlation between Citigroup and Manulife is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup 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 Citigroup 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 Citigroup 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 Citigroup i.e., Citigroup and Manulife Financial go up and down completely randomly.

Pair Corralation between Citigroup and Manulife Financial

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.34 times more return on investment than Manulife Financial. However, Citigroup is 2.96 times less risky than Manulife Financial. It trades about 0.16 of its potential returns per unit of risk. Manulife Financial Corp is currently generating about 0.02 per unit of risk. If you would invest  8,111  in Citigroup on November 20, 2024 and sell it today you would earn a total of  350.00  from holding Citigroup or generate 4.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	55.0%
Values	Daily Returns

Citigroup  vs.  Manulife Financial Corp

Citigroup

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Manulife Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Manulife Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Manulife Financial is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and Manulife Financial

The main advantage of trading using opposite Citigroup and Manulife Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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 Citigroup 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.