Correlation Between Manulife Financial and Smithson Investment
Can any of the company-specific risk be diversified away by investing in both Manulife Financial and Smithson Investment 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 Smithson Investment 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 Smithson Investment Trust, you can compare the effects of market volatilities on Manulife Financial and Smithson Investment 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 Smithson Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manulife Financial and Smithson Investment.
Diversification Opportunities for Manulife Financial and Smithson Investment
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Manulife and Smithson is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp and Smithson Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smithson Investment Trust 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 Smithson Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smithson Investment Trust has no effect on the direction of Manulife Financial i.e., Manulife Financial and Smithson Investment go up and down completely randomly.
Pair Corralation between Manulife Financial and Smithson Investment
Assuming the 90 days trading horizon Manulife Financial is expected to generate 3.78 times less return on investment than Smithson Investment. In addition to that, Manulife Financial is 1.56 times more volatile than Smithson Investment Trust. It trades about 0.04 of its total potential returns per unit of risk. Smithson Investment Trust is currently generating about 0.25 per unit of volatility. If you would invest 146,200 in Smithson Investment Trust on October 29, 2024 and sell it today you would earn a total of 6,200 from holding Smithson Investment Trust or generate 4.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 55.0% |
| Values | Daily Returns |
Manulife Financial Corp vs. Smithson Investment Trust
Performance |
| Timeline |
| Manulife Financial Corp |
| Smithson Investment Trust |
Manulife Financial and Smithson Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Manulife Financial and Smithson Investment
The main advantage of trading using opposite Manulife Financial and Smithson Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Manulife Financial position performs unexpectedly, Smithson Investment 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 Smithson Investment will offset losses from the drop in Smithson Investment's long position.| Manulife Financial vs. Vitec Software Group | Manulife Financial vs. bet at home AG | Manulife Financial vs. Qurate Retail Series | Manulife Financial vs. DFS Furniture PLC |
| Smithson Investment vs. Europa Metals | Smithson Investment vs. National Beverage Corp | Smithson Investment vs. MoneysupermarketCom Group PLC | Smithson Investment vs. Empire Metals Limited |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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