Correlation Between Desjardins and Manulife Multifactor

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

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

Diversification Opportunities for Desjardins and Manulife Multifactor

0.78

Correlation Coefficient

Desjardins  Manulife Multifactor

Poor diversification

The 3 months correlation between Desjardins and Manulife is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Desjardins RI USA and Manulife Multifactor Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Multifactor and Desjardins 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 Desjardins RI USA are associated (or correlated) with Manulife Multifactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Multifactor has no effect on the direction of Desjardins i.e., Desjardins and Manulife Multifactor go up and down completely randomly.

Pair Corralation between Desjardins and Manulife Multifactor

Assuming the 90 days trading horizon Desjardins RI USA is expected to generate 1.07 times more return on investment than Manulife Multifactor. However, Desjardins is 1.07 times more volatile than Manulife Multifactor Canadian. It trades about 0.18 of its potential returns per unit of risk. Manulife Multifactor Canadian is currently generating about 0.12 per unit of risk. If you would invest  3,040  in Desjardins RI USA on October 5, 2024 and sell it today you would earn a total of  1,462  from holding Desjardins RI USA or generate 48.09% return on investment over 90 days.

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

Desjardins RI USA  vs.  Manulife Multifactor Canadian

Desjardins RI USA

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Desjardins RI USA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Desjardins displayed solid returns over the last few months and may actually be approaching a breakup point.

Manulife Multifactor

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Multifactor Canadian are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Manulife Multifactor is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Desjardins and Manulife Multifactor

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

The idea behind Desjardins RI USA and Manulife Multifactor Canadian 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.