Correlation Between Manulife Multifactor and Vanguard

Can any of the company-specific risk be diversified away by investing in both Manulife Multifactor and Vanguard 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 Vanguard 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 Vanguard SP 500, you can compare the effects of market volatilities on Manulife Multifactor and Vanguard 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 Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manulife Multifactor and Vanguard.

Diversification Opportunities for Manulife Multifactor and Vanguard

0.92

Correlation Coefficient

Manulife Multifactor  Vanguard

Almost no diversification

The 3 months correlation between Manulife and Vanguard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Multifactor Large and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 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 Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of Manulife Multifactor i.e., Manulife Multifactor and Vanguard go up and down completely randomly.

Pair Corralation between Manulife Multifactor and Vanguard

Assuming the 90 days trading horizon Manulife Multifactor Large is expected to generate 0.86 times more return on investment than Vanguard. However, Manulife Multifactor Large is 1.16 times less risky than Vanguard. It trades about -0.05 of its potential returns per unit of risk. Vanguard SP 500 is currently generating about -0.09 per unit of risk. If you would invest  5,244  in Manulife Multifactor Large on December 29, 2024 and sell it today you would lose (135.00) from holding Manulife Multifactor Large or give up 2.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Manulife Multifactor Large  vs.  Vanguard SP 500

Manulife Multifactor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Manulife Multifactor Large has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Vanguard SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vanguard 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 Vanguard

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

The idea behind Manulife Multifactor Large and Vanguard SP 500 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.