Correlation Between IShares MSCI and Manulife Multifactor

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

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

Diversification Opportunities for IShares MSCI and Manulife Multifactor

-0.43

Correlation Coefficient

IShares MSCI  Manulife Multifactor

Very good diversification

The 3 months correlation between IShares and Manulife is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Europe and Manulife Multifactor Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Multifactor Mid and IShares MSCI 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 MSCI Europe 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 Mid has no effect on the direction of IShares MSCI i.e., IShares MSCI and Manulife Multifactor go up and down completely randomly.

Pair Corralation between IShares MSCI and Manulife Multifactor

Assuming the 90 days trading horizon iShares MSCI Europe is expected to under-perform the Manulife Multifactor. But the etf apears to be less risky and, when comparing its historical volatility, iShares MSCI Europe is 1.55 times less risky than Manulife Multifactor. The etf trades about -0.08 of its potential returns per unit of risk. The Manulife Multifactor Mid is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,449  in Manulife Multifactor Mid on September 22, 2024 and sell it today you would earn a total of  13.00  from holding Manulife Multifactor Mid or generate 0.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

iShares MSCI Europe  vs.  Manulife Multifactor Mid

iShares MSCI Europe

Risk-Adjusted Performance

0 of 100

Very Weak

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

Manulife Multifactor Mid

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IShares MSCI and Manulife Multifactor

The main advantage of trading using opposite IShares MSCI and Manulife Multifactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 iShares MSCI Europe and Manulife Multifactor Mid 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.