Correlation Between BMTC and Manulife Financial

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

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

Diversification Opportunities for BMTC and Manulife Financial

0.32

Correlation Coefficient

BMTC  Manulife Financial

Weak diversification

The 3 months correlation between BMTC and Manulife is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding BMTC Group 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 BMTC 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 BMTC Group 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 BMTC i.e., BMTC and Manulife Financial go up and down completely randomly.

Pair Corralation between BMTC and Manulife Financial

Assuming the 90 days trading horizon BMTC is expected to generate 7.11 times less return on investment than Manulife Financial. In addition to that, BMTC is 1.22 times more volatile than Manulife Financial Corp. It trades about 0.01 of its total potential returns per unit of risk. Manulife Financial Corp is currently generating about 0.1 per unit of volatility. If you would invest  4,130  in Manulife Financial Corp on September 23, 2024 and sell it today you would earn a total of  223.00  from holding Manulife Financial Corp or generate 5.4% return on investment over 90 days.

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

BMTC Group  vs.  Manulife Financial Corp

BMTC Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Manulife Financial Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Manulife Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BMTC and Manulife Financial

The main advantage of trading using opposite BMTC and Manulife Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMTC 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 BMTC Group 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.

Check out your portfolio center.

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..