Correlation Between GT Capital and Manulife Financial

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

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

Diversification Opportunities for GT Capital and Manulife Financial

-0.46

Correlation Coefficient

GT Capital  Manulife Financial

Very good diversification

The 3 months correlation between GTCAP and Manulife is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding GT Capital Holdings 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 GT Capital 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 GT Capital Holdings 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 GT Capital i.e., GT Capital and Manulife Financial go up and down completely randomly.

Pair Corralation between GT Capital and Manulife Financial

Assuming the 90 days trading horizon GT Capital Holdings is expected to under-perform the Manulife Financial. But the stock apears to be less risky and, when comparing its historical volatility, GT Capital Holdings is 1.62 times less risky than Manulife Financial. The stock trades about -0.09 of its potential returns per unit of risk. The Manulife Financial Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  188,900  in Manulife Financial Corp on November 29, 2024 and sell it today you would lose (500.00) from holding Manulife Financial Corp or give up 0.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	66.67%
Values	Daily Returns

GT Capital Holdings  vs.  Manulife Financial Corp

GT Capital Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days GT Capital Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Manulife Financial Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with GT Capital and Manulife Financial

The main advantage of trading using opposite GT Capital and Manulife Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GT Capital 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 GT Capital Holdings 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.