Correlation Between CI Canada and Manulife Smart

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

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

Diversification Opportunities for CI Canada and Manulife Smart

0.84

Correlation Coefficient

CI Canada  Manulife Smart

Very poor diversification

The 3 months correlation between DGRC and Manulife is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding CI Canada Quality and Manulife Smart Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Smart Dividend and CI Canada 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 CI Canada Quality are associated (or correlated) with Manulife Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Smart Dividend has no effect on the direction of CI Canada i.e., CI Canada and Manulife Smart go up and down completely randomly.

Pair Corralation between CI Canada and Manulife Smart

Assuming the 90 days trading horizon CI Canada Quality is expected to generate 1.21 times more return on investment than Manulife Smart. However, CI Canada is 1.21 times more volatile than Manulife Smart Dividend. It trades about 0.11 of its potential returns per unit of risk. Manulife Smart Dividend is currently generating about 0.09 per unit of risk. If you would invest  3,823  in CI Canada Quality on December 30, 2024 and sell it today you would earn a total of  194.00  from holding CI Canada Quality or generate 5.07% return on investment over 90 days.

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

CI Canada Quality  vs.  Manulife Smart Dividend

CI Canada Quality

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CI Canada Quality are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, CI Canada is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Manulife Smart Dividend

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Smart Dividend are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Manulife Smart is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CI Canada and Manulife Smart

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

The idea behind CI Canada Quality and Manulife Smart Dividend 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.