Correlation Between Sun Life and Manulife Financial

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

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

Diversification Opportunities for Sun Life and Manulife Financial

0.96

Correlation Coefficient

Sun Life  Manulife Financial

Almost no diversification

The 3 months correlation between Sun and Manulife is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Manulife Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Financial Corp and Sun Life 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 Sun Life Financial are associated (or correlated) with Manulife Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Financial Corp has no effect on the direction of Sun Life i.e., Sun Life and Manulife Financial go up and down completely randomly.

Pair Corralation between Sun Life and Manulife Financial

Assuming the 90 days trading horizon Sun Life is expected to generate 1.27 times less return on investment than Manulife Financial. But when comparing it to its historical volatility, Sun Life Financial is 1.38 times less risky than Manulife Financial. It trades about 0.31 of its potential returns per unit of risk. Manulife Financial Corp is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  3,692  in Manulife Financial Corp on September 3, 2024 and sell it today you would earn a total of  815.00  from holding Manulife Financial Corp or generate 22.07% return on investment over 90 days.

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

Sun Life Financial  vs.  Manulife Financial Corp

Sun Life Financial

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Sun Life displayed solid returns over the last few months and may actually be approaching a breakup point.

Manulife Financial Corp

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Manulife Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sun Life and Manulife Financial

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

The idea behind Sun Life Financial and Manulife Financial Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..