Correlation Between Purpose Tactical and Manulife Multifactor

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

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

Diversification Opportunities for Purpose Tactical and Manulife Multifactor

0.88

Correlation Coefficient

Purpose Tactical  Manulife Multifactor

Very poor diversification

The 3 months correlation between Purpose and Manulife is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Purpose Tactical Hedged and Manulife Multifactor Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Multifactor Mid and Purpose Tactical 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 Purpose Tactical Hedged are associated (or correlated) with Manulife Multifactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Multifactor Mid has no effect on the direction of Purpose Tactical i.e., Purpose Tactical and Manulife Multifactor go up and down completely randomly.

Pair Corralation between Purpose Tactical and Manulife Multifactor

Assuming the 90 days trading horizon Purpose Tactical Hedged is expected to under-perform the Manulife Multifactor. But the etf apears to be less risky and, when comparing its historical volatility, Purpose Tactical Hedged is 1.22 times less risky than Manulife Multifactor. The etf trades about -0.09 of its potential returns per unit of risk. The Manulife Multifactor Mid is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  4,450  in Manulife Multifactor Mid on December 31, 2024 and sell it today you would lose (156.00) from holding Manulife Multifactor Mid or give up 3.51% of portfolio value over 90 days.

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

Purpose Tactical Hedged  vs.  Manulife Multifactor Mid

Purpose Tactical Hedged

Risk-Adjusted Performance

Very Weak

Over the last 90 days Purpose Tactical Hedged has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Purpose Tactical is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Manulife Multifactor Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Manulife Multifactor Mid 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.

Pair Trading with Purpose Tactical and Manulife Multifactor

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

The idea behind Purpose Tactical Hedged and Manulife Multifactor Mid 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.