Correlation Between Manulife Financial and SBM Offshore

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

By analyzing existing cross correlation between Manulife Financial and SBM Offshore NV, you can compare the effects of market volatilities on Manulife Financial and SBM Offshore 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 SBM Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manulife Financial and SBM Offshore.

Diversification Opportunities for Manulife Financial and SBM Offshore

0.88

Correlation Coefficient

Manulife Financial  SBM Offshore

Very poor diversification

The 3 months correlation between Manulife and SBM is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial and SBM Offshore NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM Offshore NV 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 SBM Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM Offshore NV has no effect on the direction of Manulife Financial i.e., Manulife Financial and SBM Offshore go up and down completely randomly.

Pair Corralation between Manulife Financial and SBM Offshore

Assuming the 90 days horizon Manulife Financial is expected to under-perform the SBM Offshore. But the pink sheet apears to be less risky and, when comparing its historical volatility, Manulife Financial is 2.05 times less risky than SBM Offshore. The pink sheet trades about -0.09 of its potential returns per unit of risk. The SBM Offshore NV is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,801  in SBM Offshore NV on September 27, 2024 and sell it today you would lose (101.00) from holding SBM Offshore NV or give up 5.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Manulife Financial  vs.  SBM Offshore NV

Manulife Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Manulife Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Manulife Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

SBM Offshore NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBM Offshore NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, SBM Offshore is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Manulife Financial and SBM Offshore

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

The idea behind Manulife Financial and SBM Offshore NV 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..