Correlation Between Manulife Financial and China Life

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

Diversification Opportunities for Manulife Financial and China Life

0.36

Correlation Coefficient

Manulife Financial  China Life

Weak diversification

The 3 months correlation between Manulife and China is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp and China Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Life Insurance 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 China Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Life Insurance has no effect on the direction of Manulife Financial i.e., Manulife Financial and China Life go up and down completely randomly.

Pair Corralation between Manulife Financial and China Life

Considering the 90-day investment horizon Manulife Financial Corp is expected to under-perform the China Life. But the stock apears to be less risky and, when comparing its historical volatility, Manulife Financial Corp is 2.27 times less risky than China Life. The stock trades about -0.24 of its potential returns per unit of risk. The China Life Insurance is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  202.00  in China Life Insurance on September 20, 2024 and sell it today you would lose (13.00) from holding China Life Insurance or give up 6.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Manulife Financial Corp  vs.  China Life Insurance

Manulife Financial Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Manulife Financial is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

China Life Insurance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Life Insurance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward-looking indicators, China Life reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Manulife Financial and China Life

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

The idea behind Manulife Financial Corp and China Life Insurance 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.