Correlation Between Manulife Financial and Capitan Mining

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

Diversification Opportunities for Manulife Financial and Capitan Mining

0.85

Correlation Coefficient

Manulife Financial  Capitan Mining

Very poor diversification

The 3 months correlation between Manulife and Capitan is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp and Capitan Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitan Mining 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 Capitan Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitan Mining has no effect on the direction of Manulife Financial i.e., Manulife Financial and Capitan Mining go up and down completely randomly.

Pair Corralation between Manulife Financial and Capitan Mining

Assuming the 90 days trading horizon Manulife Financial is expected to generate 7.69 times less return on investment than Capitan Mining. But when comparing it to its historical volatility, Manulife Financial Corp is 5.88 times less risky than Capitan Mining. It trades about 0.16 of its potential returns per unit of risk. Capitan Mining is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Capitan Mining on September 21, 2024 and sell it today you would earn a total of  16.00  from holding Capitan Mining or generate 114.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Manulife Financial Corp  vs.  Capitan Mining

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 very unfluctuating fundamental indicators, Manulife Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Capitan Mining

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capitan Mining are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Capitan Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Manulife Financial and Capitan Mining

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

The idea behind Manulife Financial Corp and Capitan Mining 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.