Correlation Between Manulife Financial and GT Capital

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

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

Diversification Opportunities for Manulife Financial and GT Capital

-0.74

Correlation Coefficient

Manulife Financial  GT Capital

Pay attention - limited upside

The 3 months correlation between Manulife and GTCAP is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp and GT Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GT Capital Holdings and Manulife Financial 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 Manulife Financial Corp are associated (or correlated) with GT Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GT Capital Holdings has no effect on the direction of Manulife Financial i.e., Manulife Financial and GT Capital go up and down completely randomly.

Pair Corralation between Manulife Financial and GT Capital

Assuming the 90 days trading horizon Manulife Financial Corp is expected to generate 2.58 times more return on investment than GT Capital. However, Manulife Financial is 2.58 times more volatile than GT Capital Holdings. It trades about 0.15 of its potential returns per unit of risk. GT Capital Holdings is currently generating about -0.08 per unit of risk. If you would invest  146,616  in Manulife Financial Corp on September 13, 2024 and sell it today you would earn a total of  43,284  from holding Manulife Financial Corp or generate 29.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	73.02%
Values	Daily Returns

Manulife Financial Corp  vs.  GT Capital Holdings

Manulife Financial Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Manulife Financial exhibited solid returns over the last few months and may actually be approaching a breakup point.

GT Capital Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GT Capital Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Manulife Financial and GT Capital

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

The idea behind Manulife Financial Corp and GT Capital Holdings 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.