Correlation Between Manulife Financial and Manulife Fin

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

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

Diversification Opportunities for Manulife Financial and Manulife Fin

0.63

Correlation Coefficient

Manulife Financial  Manulife Fin

Poor diversification

The 3 months correlation between Manulife and Manulife is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp and Manulife Fin Non in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Fin Non and Manulife Financial 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 Financial Corp are associated (or correlated) with Manulife Fin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Fin Non has no effect on the direction of Manulife Financial i.e., Manulife Financial and Manulife Fin go up and down completely randomly.

Pair Corralation between Manulife Financial and Manulife Fin

Assuming the 90 days trading horizon Manulife Financial Corp is expected to under-perform the Manulife Fin. But the preferred stock apears to be less risky and, when comparing its historical volatility, Manulife Financial Corp is 1.09 times less risky than Manulife Fin. The preferred stock trades about -0.06 of its potential returns per unit of risk. The Manulife Fin Non is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,475  in Manulife Fin Non on December 25, 2024 and sell it today you would lose (10.00) from holding Manulife Fin Non or give up 0.4% of portfolio value over 90 days.

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

Manulife Financial Corp  vs.  Manulife Fin Non

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.

Manulife Fin Non

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Manulife Financial and Manulife Fin

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

The idea behind Manulife Financial Corp and Manulife Fin Non 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.