Correlation Between IShares ESG and Manulife Multifactor

Can any of the company-specific risk be diversified away by investing in both IShares ESG 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 ESG 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 ESG Aware and Manulife Multifactor Canadian, you can compare the effects of market volatilities on IShares ESG 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 ESG with a short position of Manulife Multifactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares ESG and Manulife Multifactor.

Diversification Opportunities for IShares ESG and Manulife Multifactor

0.78

Correlation Coefficient

IShares ESG  Manulife Multifactor

Poor diversification

The 3 months correlation between IShares and Manulife is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding iShares ESG Aware and Manulife Multifactor Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Multifactor and IShares ESG 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 ESG Aware 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 IShares ESG i.e., IShares ESG and Manulife Multifactor go up and down completely randomly.

Pair Corralation between IShares ESG and Manulife Multifactor

Assuming the 90 days trading horizon iShares ESG Aware is expected to under-perform the Manulife Multifactor. But the etf apears to be less risky and, when comparing its historical volatility, iShares ESG Aware is 1.81 times less risky than Manulife Multifactor. The etf trades about -0.22 of its potential returns per unit of risk. The Manulife Multifactor Canadian is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  4,234  in Manulife Multifactor Canadian on September 22, 2024 and sell it today you would lose (96.00) from holding Manulife Multifactor Canadian or give up 2.27% of portfolio value over 90 days.

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

iShares ESG Aware  vs.  Manulife Multifactor Canadian

iShares ESG Aware

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Aware are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares ESG is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Manulife Multifactor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Multifactor Canadian are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 ESG and Manulife Multifactor

The main advantage of trading using opposite IShares ESG and Manulife Multifactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares ESG 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 ESG Aware and Manulife Multifactor Canadian 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..