Correlation Between Tech Leaders and Manulife Multifactor

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

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

Diversification Opportunities for Tech Leaders and Manulife Multifactor

-0.27

Correlation Coefficient

Tech Leaders  Manulife Multifactor

Very good diversification

The 3 months correlation between Tech and Manulife is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Tech Leaders Income and Manulife Multifactor Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Multifactor and Tech Leaders 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 Tech Leaders Income 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 has no effect on the direction of Tech Leaders i.e., Tech Leaders and Manulife Multifactor go up and down completely randomly.

Pair Corralation between Tech Leaders and Manulife Multifactor

Assuming the 90 days trading horizon Tech Leaders Income is expected to generate 1.83 times more return on investment than Manulife Multifactor. However, Tech Leaders is 1.83 times more volatile than Manulife Multifactor Developed. It trades about 0.18 of its potential returns per unit of risk. Manulife Multifactor Developed is currently generating about 0.0 per unit of risk. If you would invest  2,414  in Tech Leaders Income on September 2, 2024 and sell it today you would earn a total of  102.00  from holding Tech Leaders Income or generate 4.23% return on investment over 90 days.

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

Tech Leaders Income  vs.  Manulife Multifactor Developed

Tech Leaders Income

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tech Leaders Income are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Tech Leaders may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Manulife Multifactor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Manulife Multifactor Developed has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Manulife Multifactor is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tech Leaders and Manulife Multifactor

The main advantage of trading using opposite Tech Leaders and Manulife Multifactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tech Leaders 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 Tech Leaders Income and Manulife Multifactor Developed 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.