Correlation Between Dynamic Global and Manulife Global

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

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

Diversification Opportunities for Dynamic Global and Manulife Global

0.43

Correlation Coefficient

Dynamic Global  Manulife Global

Very weak diversification

The 3 months correlation between Dynamic and Manulife is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Global Fixed and Manulife Global Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Global Equity and Dynamic Global 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 Dynamic Global Fixed are associated (or correlated) with Manulife Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Global Equity has no effect on the direction of Dynamic Global i.e., Dynamic Global and Manulife Global go up and down completely randomly.

Pair Corralation between Dynamic Global and Manulife Global

Assuming the 90 days trading horizon Dynamic Global is expected to generate 3.85 times less return on investment than Manulife Global. But when comparing it to its historical volatility, Dynamic Global Fixed is 1.68 times less risky than Manulife Global. It trades about 0.04 of its potential returns per unit of risk. Manulife Global Equity is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,075  in Manulife Global Equity on September 29, 2024 and sell it today you would earn a total of  1,232  from holding Manulife Global Equity or generate 30.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	5.86%
Values	Daily Returns

Dynamic Global Fixed  vs.  Manulife Global Equity

Dynamic Global Fixed

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Global Fixed are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, Dynamic Global is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Manulife Global Equity

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Global Equity are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Manulife Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dynamic Global and Manulife Global

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

The idea behind Dynamic Global Fixed and Manulife Global Equity 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.