Correlation Between IShares Canadian and Manulife Smart

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

By analyzing existing cross correlation between iShares Canadian Select and Manulife Smart Dividend, you can compare the effects of market volatilities on IShares Canadian and Manulife Smart 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 IShares Canadian with a short position of Manulife Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and Manulife Smart.

Diversification Opportunities for IShares Canadian and Manulife Smart

0.89

Correlation Coefficient

IShares Canadian  Manulife Smart

Very poor diversification

The 3 months correlation between IShares and Manulife is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian Select and Manulife Smart Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Smart Dividend and IShares Canadian 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 iShares Canadian Select are associated (or correlated) with Manulife Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Smart Dividend has no effect on the direction of IShares Canadian i.e., IShares Canadian and Manulife Smart go up and down completely randomly.

Pair Corralation between IShares Canadian and Manulife Smart

Assuming the 90 days trading horizon iShares Canadian Select is expected to generate 0.77 times more return on investment than Manulife Smart. However, iShares Canadian Select is 1.3 times less risky than Manulife Smart. It trades about -0.06 of its potential returns per unit of risk. Manulife Smart Dividend is currently generating about -0.05 per unit of risk. If you would invest  3,234  in iShares Canadian Select on December 1, 2024 and sell it today you would lose (51.00) from holding iShares Canadian Select or give up 1.58% of portfolio value over 90 days.

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

iShares Canadian Select  vs.  Manulife Smart Dividend

iShares Canadian Select

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Canadian Select has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Manulife Smart Dividend

Risk-Adjusted Performance

Very Weak

Over the last 90 days Manulife Smart Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Manulife Smart is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Canadian and Manulife Smart

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

The idea behind iShares Canadian Select and Manulife Smart Dividend 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.