Correlation Between Manulife Financial and Naked Wines

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

Diversification Opportunities for Manulife Financial and Naked Wines

-0.8
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Manulife and Naked is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp and Naked Wines plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naked Wines plc 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 Naked Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naked Wines plc has no effect on the direction of Manulife Financial i.e., Manulife Financial and Naked Wines go up and down completely randomly.

Pair Corralation between Manulife Financial and Naked Wines

Assuming the 90 days trading horizon Manulife Financial Corp is expected to under-perform the Naked Wines. But the stock apears to be less risky and, when comparing its historical volatility, Manulife Financial Corp is 2.87 times less risky than Naked Wines. The stock trades about 0.0 of its potential returns per unit of risk. The Naked Wines plc is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  4,560  in Naked Wines plc on November 3, 2024 and sell it today you would earn a total of  940.00  from holding Naked Wines plc or generate 20.61% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy43.48%
ValuesDaily Returns

Manulife Financial Corp  vs.  Naked Wines plc

 Performance 
       Timeline  
Manulife Financial Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
OK
Over the last 90 days Manulife Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Manulife Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.
Naked Wines plc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Naked Wines plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Naked Wines is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Manulife Financial and Naked Wines Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Manulife Financial and Naked Wines

The main advantage of trading using opposite Manulife Financial and Naked Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Manulife Financial position performs unexpectedly, Naked Wines 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 Naked Wines will offset losses from the drop in Naked Wines' long position.
The idea behind Manulife Financial Corp and Naked Wines plc 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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