Correlation Between Top Frontier and Manulife Financial

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

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

Diversification Opportunities for Top Frontier and Manulife Financial

-0.46

Correlation Coefficient

Top Frontier  Manulife Financial

Very good diversification

The 3 months correlation between Top and Manulife is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Top Frontier Investment 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 Top Frontier 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 Top Frontier Investment 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 Top Frontier i.e., Top Frontier and Manulife Financial go up and down completely randomly.

Pair Corralation between Top Frontier and Manulife Financial

Assuming the 90 days trading horizon Top Frontier is expected to generate 4.01 times less return on investment than Manulife Financial. But when comparing it to its historical volatility, Top Frontier Investment is 1.1 times less risky than Manulife Financial. It trades about 0.04 of its potential returns per unit of risk. Manulife Financial Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  146,616  in Manulife Financial Corp on September 13, 2024 and sell it today you would earn a total of  43,284  from holding Manulife Financial Corp or generate 29.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	76.67%
Values	Daily Returns

Top Frontier Investment  vs.  Manulife Financial Corp

Top Frontier Investment

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Top Frontier Investment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Top Frontier may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Manulife Financial Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Manulife Financial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Top Frontier and Manulife Financial

The main advantage of trading using opposite Top Frontier and Manulife Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Top Frontier 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 Top Frontier Investment 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.