Correlation Between Manulife Financial and Pacific Ridge

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

Diversification Opportunities for Manulife Financial and Pacific Ridge

-0.75

Correlation Coefficient

Manulife Financial  Pacific Ridge

Pay attention - limited upside

The 3 months correlation between Manulife and Pacific is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp and Pacific Ridge Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Ridge Exploration 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 Pacific Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Ridge Exploration has no effect on the direction of Manulife Financial i.e., Manulife Financial and Pacific Ridge go up and down completely randomly.

Pair Corralation between Manulife Financial and Pacific Ridge

Assuming the 90 days trading horizon Manulife Financial Corp is expected to generate 0.12 times more return on investment than Pacific Ridge. However, Manulife Financial Corp is 8.54 times less risky than Pacific Ridge. It trades about 0.18 of its potential returns per unit of risk. Pacific Ridge Exploration is currently generating about -0.01 per unit of risk. If you would invest  2,540  in Manulife Financial Corp on September 15, 2024 and sell it today you would earn a total of  1,867  from holding Manulife Financial Corp or generate 73.5% return on investment over 90 days.

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

Manulife Financial Corp  vs.  Pacific Ridge Exploration

Manulife Financial Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Manulife Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pacific Ridge Exploration

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Ridge Exploration are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Pacific Ridge showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Manulife Financial and Pacific Ridge

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

The idea behind Manulife Financial Corp and Pacific Ridge Exploration 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 Global Correlations module to find global opportunities by holding instruments from different markets.