Correlation Between Manulife Financial and Sanlam

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

Diversification Opportunities for Manulife Financial and Sanlam

0.36

Correlation Coefficient

Manulife Financial  Sanlam

Weak diversification

The 3 months correlation between Manulife and Sanlam is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp and Sanlam Ltd PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanlam Ltd PK 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 Sanlam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanlam Ltd PK has no effect on the direction of Manulife Financial i.e., Manulife Financial and Sanlam go up and down completely randomly.

Pair Corralation between Manulife Financial and Sanlam

Considering the 90-day investment horizon Manulife Financial Corp is expected to generate 1.04 times more return on investment than Sanlam. However, Manulife Financial is 1.04 times more volatile than Sanlam Ltd PK. It trades about 0.02 of its potential returns per unit of risk. Sanlam Ltd PK is currently generating about 0.01 per unit of risk. If you would invest  3,031  in Manulife Financial Corp on December 29, 2024 and sell it today you would earn a total of  45.00  from holding Manulife Financial Corp or generate 1.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Manulife Financial Corp  vs.  Sanlam Ltd PK

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 rather sound technical and fundamental indicators, Manulife Financial is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Sanlam Ltd PK

Risk-Adjusted Performance

Weak

Over the last 90 days Sanlam Ltd PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Sanlam is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Manulife Financial and Sanlam

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

The idea behind Manulife Financial Corp and Sanlam Ltd PK 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.