Correlation Between Manulife Financial and Union Bank

Can any of the company-specific risk be diversified away by investing in both Manulife Financial and Union Bank 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 Union Bank 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 Union Bank of, you can compare the effects of market volatilities on Manulife Financial and Union Bank 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 Union Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manulife Financial and Union Bank.

Diversification Opportunities for Manulife Financial and Union Bank

0.01

Correlation Coefficient

Manulife Financial  Union Bank

Significant diversification

The 3 months correlation between Manulife and Union is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp and Union Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Bank 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 Union Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Bank has no effect on the direction of Manulife Financial i.e., Manulife Financial and Union Bank go up and down completely randomly.

Pair Corralation between Manulife Financial and Union Bank

Assuming the 90 days trading horizon Manulife Financial Corp is expected to generate 2.58 times more return on investment than Union Bank. However, Manulife Financial is 2.58 times more volatile than Union Bank of. It trades about 0.18 of its potential returns per unit of risk. Union Bank of is currently generating about 0.07 per unit of risk. If you would invest  131,360  in Manulife Financial Corp on September 5, 2024 and sell it today you would earn a total of  58,540  from holding Manulife Financial Corp or generate 44.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	77.78%
Values	Daily Returns

Manulife Financial Corp  vs.  Union Bank of

Manulife Financial Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial Corp are ranked lower than 14 (%) 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.

Union Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Union Bank of are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Union Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Manulife Financial and Union Bank

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

The idea behind Manulife Financial Corp and Union Bank of 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.