Correlation Between Leons Furniture and Manulife Financial

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

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

Diversification Opportunities for Leons Furniture and Manulife Financial

0.22

Correlation Coefficient

Leons Furniture  Manulife Financial

Modest diversification

The 3 months correlation between Leons and Manulife is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Leons Furniture Limited 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 Leons Furniture 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 Leons Furniture Limited 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 Leons Furniture i.e., Leons Furniture and Manulife Financial go up and down completely randomly.

Pair Corralation between Leons Furniture and Manulife Financial

Assuming the 90 days trading horizon Leons Furniture Limited is expected to under-perform the Manulife Financial. In addition to that, Leons Furniture is 2.38 times more volatile than Manulife Financial Corp. It trades about -0.07 of its total potential returns per unit of risk. Manulife Financial Corp is currently generating about -0.05 per unit of volatility. If you would invest  1,680  in Manulife Financial Corp on December 22, 2024 and sell it today you would lose (42.00) from holding Manulife Financial Corp or give up 2.5% of portfolio value over 90 days.

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

Leons Furniture Limited  vs.  Manulife Financial Corp

Leons Furniture

Risk-Adjusted Performance

Very Weak

Over the last 90 days Leons Furniture Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm 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. 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 Leons Furniture and Manulife Financial

The main advantage of trading using opposite Leons Furniture and Manulife Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leons Furniture 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 Leons Furniture Limited 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.