Correlation Between Economic Investment and Manulife Financial

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

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

Diversification Opportunities for Economic Investment and Manulife Financial

0.73

Correlation Coefficient

Economic Investment  Manulife Financial

Poor diversification

The 3 months correlation between Economic and Manulife is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Economic Investment Trust 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 Economic Investment 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 Economic Investment Trust 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 Economic Investment i.e., Economic Investment and Manulife Financial go up and down completely randomly.

Pair Corralation between Economic Investment and Manulife Financial

Assuming the 90 days trading horizon Economic Investment Trust is expected to under-perform the Manulife Financial. In addition to that, Economic Investment is 2.02 times more volatile than Manulife Financial Corp. It trades about -0.01 of its total potential returns per unit of risk. Manulife Financial Corp is currently generating about 0.06 per unit of volatility. If you would invest  1,672  in Manulife Financial Corp on December 24, 2024 and sell it today you would earn a total of  72.00  from holding Manulife Financial Corp or generate 4.31% return on investment over 90 days.

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

Economic Investment Trust  vs.  Manulife Financial Corp

Economic Investment Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Economic Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Economic Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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 4 (%) 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Economic Investment and Manulife Financial

The main advantage of trading using opposite Economic Investment and Manulife Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Economic Investment 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 Economic Investment Trust 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.