Correlation Between PREMIER FOODS and Manulife Financial

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

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

Diversification Opportunities for PREMIER FOODS and Manulife Financial

0.21

Correlation Coefficient

PREMIER FOODS  Manulife Financial

Modest diversification

The 3 months correlation between PREMIER and Manulife is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding PREMIER FOODS and Manulife Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Financial and PREMIER FOODS 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 PREMIER FOODS 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 PREMIER FOODS i.e., PREMIER FOODS and Manulife Financial go up and down completely randomly.

Pair Corralation between PREMIER FOODS and Manulife Financial

Assuming the 90 days trading horizon PREMIER FOODS is expected to under-perform the Manulife Financial. But the stock apears to be less risky and, when comparing its historical volatility, PREMIER FOODS is 1.14 times less risky than Manulife Financial. The stock trades about -0.01 of its potential returns per unit of risk. The Manulife Financial is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,883  in Manulife Financial on December 25, 2024 and sell it today you would lose (16.00) from holding Manulife Financial or give up 0.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

PREMIER FOODS  vs.  Manulife Financial

PREMIER FOODS

Risk-Adjusted Performance

Very Weak

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

Manulife Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Manulife Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic 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 PREMIER FOODS and Manulife Financial

The main advantage of trading using opposite PREMIER FOODS and Manulife Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PREMIER FOODS 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 PREMIER FOODS 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.