Correlation Between Union Bank and Manulife Financial

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

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

Diversification Opportunities for Union Bank and Manulife Financial

0.01

Correlation Coefficient

Union Bank  Manulife Financial

Significant diversification

The 3 months correlation between Union and Manulife is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Union Bank of 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 Union 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 Union Bank of 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 Union Bank i.e., Union Bank and Manulife Financial go up and down completely randomly.

Pair Corralation between Union Bank and Manulife Financial

Assuming the 90 days trading horizon Union Bank is expected to generate 6.24 times less return on investment than Manulife Financial. But when comparing it to its historical volatility, Union Bank of is 2.58 times less risky than Manulife Financial. It trades about 0.07 of its potential returns per unit of risk. Manulife Financial Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  131,360  in Manulife Financial Corp on September 5, 2024 and sell it today you would earn a total of  58,540  from holding Manulife Financial Corp or generate 44.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	77.78%
Values	Daily Returns

Union Bank of  vs.  Manulife Financial Corp

Union Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Union Bank of are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Union Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Manulife Financial Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak 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 Union Bank and Manulife Financial

The main advantage of trading using opposite Union Bank and Manulife Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Bank 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 Union Bank of 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.