Correlation Between LFM Properties and Manulife Financial

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

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

Diversification Opportunities for LFM Properties and Manulife Financial

-0.55

Correlation Coefficient

LFM Properties  Manulife Financial

Excellent diversification

The 3 months correlation between LFM and Manulife is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding LFM Properties Corp 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 LFM Properties 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 LFM Properties Corp 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 LFM Properties i.e., LFM Properties and Manulife Financial go up and down completely randomly.

Pair Corralation between LFM Properties and Manulife Financial

Assuming the 90 days trading horizon LFM Properties Corp is expected to under-perform the Manulife Financial. In addition to that, LFM Properties is 1.56 times more volatile than Manulife Financial Corp. It trades about -0.02 of its total potential returns per unit of risk. Manulife Financial Corp is currently generating about 0.16 per unit of volatility. If you would invest  148,498  in Manulife Financial Corp on September 15, 2024 and sell it today you would earn a total of  51,502  from holding Manulife Financial Corp or generate 34.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	91.3%
Values	Daily Returns

LFM Properties Corp  vs.  Manulife Financial Corp

LFM Properties Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LFM Properties Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Manulife Financial Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Manulife Financial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LFM Properties and Manulife Financial

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

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.