Correlation Between Solar Alliance and Manulife Multifactor

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

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

Diversification Opportunities for Solar Alliance and Manulife Multifactor

-0.49

Correlation Coefficient

Solar Alliance  Manulife Multifactor

Very good diversification

The 3 months correlation between Solar and Manulife is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and Manulife Multifactor Canadian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Multifactor and Solar Alliance 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 Solar Alliance Energy are associated (or correlated) with Manulife Multifactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Multifactor has no effect on the direction of Solar Alliance i.e., Solar Alliance and Manulife Multifactor go up and down completely randomly.

Pair Corralation between Solar Alliance and Manulife Multifactor

Assuming the 90 days trading horizon Solar Alliance Energy is expected to generate 9.64 times more return on investment than Manulife Multifactor. However, Solar Alliance is 9.64 times more volatile than Manulife Multifactor Canadian. It trades about 0.02 of its potential returns per unit of risk. Manulife Multifactor Canadian is currently generating about 0.06 per unit of risk. If you would invest  7.00  in Solar Alliance Energy on September 2, 2024 and sell it today you would lose (3.50) from holding Solar Alliance Energy or give up 50.0% of portfolio value over 90 days.

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

Solar Alliance Energy  vs.  Manulife Multifactor Canadian

Solar Alliance Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Solar Alliance Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Solar Alliance showed solid returns over the last few months and may actually be approaching a breakup point.

Manulife Multifactor

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Multifactor Canadian are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Manulife Multifactor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Solar Alliance and Manulife Multifactor

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

The idea behind Solar Alliance Energy and Manulife Multifactor Canadian 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.