Correlation Between Great Wes and Manulife Financial

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

By analyzing existing cross correlation between Great Wes 515 and Manulife Financial Corp, you can compare the effects of market volatilities on Great Wes 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 Great Wes with a short position of Manulife Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wes and Manulife Financial.

Diversification Opportunities for Great Wes and Manulife Financial

0.6

Correlation Coefficient

Great Wes  Manulife Financial

Poor diversification

The 3 months correlation between Great and Manulife is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Great Wes 515 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 Great Wes 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 Great Wes 515 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 Great Wes i.e., Great Wes and Manulife Financial go up and down completely randomly.

Pair Corralation between Great Wes and Manulife Financial

Assuming the 90 days trading horizon Great Wes is expected to generate 1.02 times less return on investment than Manulife Financial. But when comparing it to its historical volatility, Great Wes 515 is 1.24 times less risky than Manulife Financial. It trades about 0.17 of its potential returns per unit of risk. Manulife Financial Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,082  in Manulife Financial Corp on December 1, 2024 and sell it today you would earn a total of  135.00  from holding Manulife Financial Corp or generate 6.48% return on investment over 90 days.

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

Great Wes 515  vs.  Manulife Financial Corp

Great Wes 515

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Great Wes 515 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Great Wes may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Manulife Financial Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal fundamental indicators, Manulife Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Great Wes and Manulife Financial

The main advantage of trading using opposite Great Wes and Manulife Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Wes 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 Great Wes 515 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.