Correlation Between Manulife Financial and Prudential PLC

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

Diversification Opportunities for Manulife Financial and Prudential PLC

-0.56

Correlation Coefficient

Manulife Financial  Prudential PLC

Excellent diversification

The 3 months correlation between Manulife and Prudential is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp and Prudential PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential PLC ADR 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 Prudential PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential PLC ADR has no effect on the direction of Manulife Financial i.e., Manulife Financial and Prudential PLC go up and down completely randomly.

Pair Corralation between Manulife Financial and Prudential PLC

Considering the 90-day investment horizon Manulife Financial Corp is expected to under-perform the Prudential PLC. But the stock apears to be less risky and, when comparing its historical volatility, Manulife Financial Corp is 1.31 times less risky than Prudential PLC. The stock trades about -0.24 of its potential returns per unit of risk. The Prudential PLC ADR is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,584  in Prudential PLC ADR on September 20, 2024 and sell it today you would lose (18.00) from holding Prudential PLC ADR or give up 1.14% of portfolio value over 90 days.

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

Manulife Financial Corp  vs.  Prudential PLC ADR

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.

Prudential PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Prudential PLC is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Manulife Financial and Prudential PLC

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

The idea behind Manulife Financial Corp and Prudential PLC ADR 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.