Correlation Between Manulife Multifactor and Brompton European

Can any of the company-specific risk be diversified away by investing in both Manulife Multifactor and Brompton European 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 Multifactor and Brompton European into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Manulife Multifactor Large and Brompton European Dividend, you can compare the effects of market volatilities on Manulife Multifactor and Brompton European 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 Multifactor with a short position of Brompton European. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manulife Multifactor and Brompton European.

Diversification Opportunities for Manulife Multifactor and Brompton European

-0.02

Correlation Coefficient

Manulife Multifactor  Brompton European

Good diversification

The 3 months correlation between Manulife and Brompton is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Multifactor Large and Brompton European Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brompton European and Manulife Multifactor 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 Multifactor Large are associated (or correlated) with Brompton European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brompton European has no effect on the direction of Manulife Multifactor i.e., Manulife Multifactor and Brompton European go up and down completely randomly.

Pair Corralation between Manulife Multifactor and Brompton European

Assuming the 90 days trading horizon Manulife Multifactor Large is expected to under-perform the Brompton European. But the etf apears to be less risky and, when comparing its historical volatility, Manulife Multifactor Large is 2.11 times less risky than Brompton European. The etf trades about -0.12 of its potential returns per unit of risk. The Brompton European Dividend is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,061  in Brompton European Dividend on September 25, 2024 and sell it today you would lose (15.00) from holding Brompton European Dividend or give up 1.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Manulife Multifactor Large  vs.  Brompton European Dividend

Manulife Multifactor

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Multifactor Large are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Manulife Multifactor is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Brompton European

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brompton European Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Brompton European is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Manulife Multifactor and Brompton European

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

The idea behind Manulife Multifactor Large and Brompton European Dividend 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.