Correlation Between IShares Core and Manulife Multifactor

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

Diversification Opportunities for IShares Core and Manulife Multifactor

0.5

Correlation Coefficient

IShares Core  Manulife Multifactor

Very weak diversification

The 3 months correlation between IShares and Manulife is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SPTSX and Manulife Multifactor Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Multifactor and IShares Core 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 Core SPTSX 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 Core i.e., IShares Core and Manulife Multifactor go up and down completely randomly.

Pair Corralation between IShares Core and Manulife Multifactor

Assuming the 90 days trading horizon iShares Core SPTSX is expected to under-perform the Manulife Multifactor. But the etf apears to be less risky and, when comparing its historical volatility, iShares Core SPTSX is 1.08 times less risky than Manulife Multifactor. The etf trades about -0.03 of its potential returns per unit of risk. The Manulife Multifactor Developed is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,541  in Manulife Multifactor Developed on December 2, 2024 and sell it today you would earn a total of  74.00  from holding Manulife Multifactor Developed or generate 2.09% return on investment over 90 days.

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

iShares Core SPTSX  vs.  Manulife Multifactor Developed

iShares Core SPTSX

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Core SPTSX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, IShares Core 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

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Multifactor Developed are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Manulife Multifactor is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IShares Core and Manulife Multifactor

The main advantage of trading using opposite IShares Core and Manulife Multifactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 Core SPTSX 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.