Correlation Between China Life and Manulife Financial

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

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

Diversification Opportunities for China Life and Manulife Financial

0.66

Correlation Coefficient

China Life  Manulife Financial

Poor diversification

The 3 months correlation between China and Manulife is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding China Life Insurance and Manulife Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Financial and China Life 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 China Life Insurance 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 has no effect on the direction of China Life i.e., China Life and Manulife Financial go up and down completely randomly.

Pair Corralation between China Life and Manulife Financial

Assuming the 90 days horizon China Life Insurance is expected to generate 14.71 times more return on investment than Manulife Financial. However, China Life is 14.71 times more volatile than Manulife Financial. It trades about 0.03 of its potential returns per unit of risk. Manulife Financial is currently generating about 0.12 per unit of risk. If you would invest  190.00  in China Life Insurance on December 30, 2024 and sell it today you would earn a total of  6.00  from holding China Life Insurance or generate 3.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.85%
Values	Daily Returns

China Life Insurance  vs.  Manulife Financial

China Life Insurance

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Life Insurance are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking indicators, China Life is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Manulife Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Manulife Financial is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with China Life and Manulife Financial

The main advantage of trading using opposite China Life and Manulife Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Life 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 China Life Insurance and Manulife Financial 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.