Correlation Between Manulife Financial and Fortis

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

Diversification Opportunities for Manulife Financial and Fortis

-0.18

Correlation Coefficient

Manulife Financial  Fortis

Good diversification

The 3 months correlation between Manulife and Fortis is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp and Fortis Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortis Inc 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 Fortis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortis Inc has no effect on the direction of Manulife Financial i.e., Manulife Financial and Fortis go up and down completely randomly.

Pair Corralation between Manulife Financial and Fortis

Assuming the 90 days trading horizon Manulife Financial is expected to generate 5.4 times less return on investment than Fortis. In addition to that, Manulife Financial is 1.69 times more volatile than Fortis Inc. It trades about 0.02 of its total potential returns per unit of risk. Fortis Inc is currently generating about 0.14 per unit of volatility. If you would invest  5,926  in Fortis Inc on December 30, 2024 and sell it today you would earn a total of  556.00  from holding Fortis Inc or generate 9.38% return on investment over 90 days.

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

Manulife Financial Corp  vs.  Fortis Inc

Manulife Financial Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Manulife Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Fortis Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fortis Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Fortis may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Manulife Financial and Fortis

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

The idea behind Manulife Financial Corp and Fortis Inc 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..