Correlation Between Manulife Financial and CNO Financial

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

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

Diversification Opportunities for Manulife Financial and CNO Financial

0.65

Correlation Coefficient

Manulife Financial  CNO Financial

Poor diversification

The 3 months correlation between Manulife and CNO is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial and CNO Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNO Financial Group 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 are associated (or correlated) with CNO Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNO Financial Group has no effect on the direction of Manulife Financial i.e., Manulife Financial and CNO Financial go up and down completely randomly.

Pair Corralation between Manulife Financial and CNO Financial

Assuming the 90 days horizon Manulife Financial is expected to generate 7.68 times less return on investment than CNO Financial. But when comparing it to its historical volatility, Manulife Financial is 9.07 times less risky than CNO Financial. It trades about 0.13 of its potential returns per unit of risk. CNO Financial Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,382  in CNO Financial Group on September 15, 2024 and sell it today you would earn a total of  421.00  from holding CNO Financial Group or generate 12.45% return on investment over 90 days.

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

Manulife Financial  vs.  CNO Financial Group

Manulife Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Manulife Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CNO Financial Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CNO Financial Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, CNO Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Manulife Financial and CNO Financial

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

The idea behind Manulife Financial and CNO Financial Group 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.