Correlation Between Manulife Finl and BMTC

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

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

Diversification Opportunities for Manulife Finl and BMTC

-0.4

Correlation Coefficient

Manulife Finl  BMTC

Very good diversification

The 3 months correlation between Manulife and BMTC is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Finl Srs and BMTC Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BMTC Group and Manulife Finl 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 Manulife Finl Srs are associated (or correlated) with BMTC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BMTC Group has no effect on the direction of Manulife Finl i.e., Manulife Finl and BMTC go up and down completely randomly.

Pair Corralation between Manulife Finl and BMTC

Assuming the 90 days trading horizon Manulife Finl Srs is expected to generate 0.55 times more return on investment than BMTC. However, Manulife Finl Srs is 1.83 times less risky than BMTC. It trades about 0.1 of its potential returns per unit of risk. BMTC Group is currently generating about 0.02 per unit of risk. If you would invest  1,562  in Manulife Finl Srs on October 5, 2024 and sell it today you would earn a total of  463.00  from holding Manulife Finl Srs or generate 29.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.68%
Values	Daily Returns

Manulife Finl Srs  vs.  BMTC Group

Manulife Finl Srs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Manulife Finl Srs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Manulife Finl is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BMTC Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BMTC Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, BMTC is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Manulife Finl and BMTC

The main advantage of trading using opposite Manulife Finl and BMTC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Manulife Finl position performs unexpectedly, BMTC 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 BMTC will offset losses from the drop in BMTC's long position.

The idea behind Manulife Finl Srs and BMTC Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.