Correlation Between Manulife Financial and Philippine Business

Can any of the company-specific risk be diversified away by investing in both Manulife Financial and Philippine Business 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 Philippine Business 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 Philippine Business Bank, you can compare the effects of market volatilities on Manulife Financial and Philippine Business 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 Philippine Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manulife Financial and Philippine Business.

Diversification Opportunities for Manulife Financial and Philippine Business

0.82

Correlation Coefficient

Manulife Financial  Philippine Business

Very poor diversification

The 3 months correlation between Manulife and Philippine is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp and Philippine Business Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philippine Business Bank 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 Philippine Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philippine Business Bank has no effect on the direction of Manulife Financial i.e., Manulife Financial and Philippine Business go up and down completely randomly.

Pair Corralation between Manulife Financial and Philippine Business

Assuming the 90 days trading horizon Manulife Financial Corp is expected to generate 2.91 times more return on investment than Philippine Business. However, Manulife Financial is 2.91 times more volatile than Philippine Business Bank. It trades about 0.15 of its potential returns per unit of risk. Philippine Business Bank is currently generating about 0.15 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 Together
Strength	Strong
Accuracy	79.31%
Values	Daily Returns

Manulife Financial Corp  vs.  Philippine Business Bank

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.

Philippine Business Bank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Philippine Business Bank 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, Philippine Business exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Manulife Financial and Philippine Business

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

The idea behind Manulife Financial Corp and Philippine Business Bank 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.