Correlation Between Enbridge Pref and Manulife Financial

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

By analyzing existing cross correlation between Enbridge Pref 13 and Manulife Financial Corp, you can compare the effects of market volatilities on Enbridge Pref 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 Enbridge Pref with a short position of Manulife Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge Pref and Manulife Financial.

Diversification Opportunities for Enbridge Pref and Manulife Financial

0.92

Correlation Coefficient

Enbridge Pref  Manulife Financial

Almost no diversification

The 3 months correlation between Enbridge and Manulife is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 13 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 Enbridge Pref 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 Enbridge Pref 13 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 Enbridge Pref i.e., Enbridge Pref and Manulife Financial go up and down completely randomly.

Pair Corralation between Enbridge Pref and Manulife Financial

Assuming the 90 days trading horizon Enbridge Pref 13 is expected to under-perform the Manulife Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, Enbridge Pref 13 is 1.19 times less risky than Manulife Financial. The preferred stock trades about -0.02 of its potential returns per unit of risk. The Manulife Financial Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,205  in Manulife Financial Corp on December 13, 2024 and sell it today you would earn a total of  52.00  from holding Manulife Financial Corp or generate 2.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.33%
Values	Daily Returns

Enbridge Pref 13  vs.  Manulife Financial Corp

Enbridge Pref 13

Risk-Adjusted Performance

Insignificant

Over the last 90 days Enbridge Pref 13 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Enbridge Pref is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Manulife Financial Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Manulife Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Enbridge Pref and Manulife Financial

The main advantage of trading using opposite Enbridge Pref and Manulife Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge Pref 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 Enbridge Pref 13 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.