Correlation Between Royal Bank and Manulife Finl

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

By analyzing existing cross correlation between Royal Bank of and Manulife Finl Srs, you can compare the effects of market volatilities on Royal Bank and Manulife Finl 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 Royal Bank with a short position of Manulife Finl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Manulife Finl.

Diversification Opportunities for Royal Bank and Manulife Finl

0.32

Correlation Coefficient

Royal Bank  Manulife Finl

Weak diversification

The 3 months correlation between Royal and Manulife is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Manulife Finl Srs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Finl Srs and Royal Bank 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 Royal Bank of are associated (or correlated) with Manulife Finl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Finl Srs has no effect on the direction of Royal Bank i.e., Royal Bank and Manulife Finl go up and down completely randomly.

Pair Corralation between Royal Bank and Manulife Finl

Assuming the 90 days trading horizon Royal Bank is expected to generate 5.01 times less return on investment than Manulife Finl. But when comparing it to its historical volatility, Royal Bank of is 2.53 times less risky than Manulife Finl. It trades about 0.05 of its potential returns per unit of risk. Manulife Finl Srs is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,976  in Manulife Finl Srs on December 5, 2024 and sell it today you would earn a total of  102.00  from holding Manulife Finl Srs or generate 5.16% return on investment over 90 days.

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

Royal Bank of  vs.  Manulife Finl Srs

Royal Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Royal Bank of are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Royal Bank is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Manulife Finl Srs

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Finl Srs are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Manulife Finl is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Royal Bank and Manulife Finl

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

The idea behind Royal Bank of and Manulife Finl Srs 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.