Correlation Between Bank of the and Manulife Financial

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

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

Diversification Opportunities for Bank of the and Manulife Financial

0.12

Correlation Coefficient

Bank of the  Manulife Financial

Average diversification

The 3 months correlation between Bank and Manulife is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Bank of the 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 Bank of the 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 Bank of the 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 Bank of the i.e., Bank of the and Manulife Financial go up and down completely randomly.

Pair Corralation between Bank of the and Manulife Financial

Assuming the 90 days trading horizon Bank of the is expected to generate 15.32 times less return on investment than Manulife Financial. But when comparing it to its historical volatility, Bank of the is 2.55 times less risky than Manulife Financial. It trades about 0.03 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	76.56%
Values	Daily Returns

Bank of the  vs.  Manulife Financial Corp

Bank of the

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of the are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Bank of the is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Bank of the and Manulife Financial

The main advantage of trading using opposite Bank of the and Manulife Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of the 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 Bank of the 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.