Correlation Between Manulife Multifactor and Mackenzie Large
Can any of the company-specific risk be diversified away by investing in both Manulife Multifactor and Mackenzie Large 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 Multifactor and Mackenzie Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Manulife Multifactor Canadian and Mackenzie Large Cap, you can compare the effects of market volatilities on Manulife Multifactor and Mackenzie Large 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 Multifactor with a short position of Mackenzie Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manulife Multifactor and Mackenzie Large.
Diversification Opportunities for Manulife Multifactor and Mackenzie Large
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Manulife and Mackenzie is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Multifactor Canadian and Mackenzie Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mackenzie Large Cap and Manulife Multifactor 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 Multifactor Canadian are associated (or correlated) with Mackenzie Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mackenzie Large Cap has no effect on the direction of Manulife Multifactor i.e., Manulife Multifactor and Mackenzie Large go up and down completely randomly.
Pair Corralation between Manulife Multifactor and Mackenzie Large
Assuming the 90 days trading horizon Manulife Multifactor is expected to generate 1.53 times less return on investment than Mackenzie Large. But when comparing it to its historical volatility, Manulife Multifactor Canadian is 1.02 times less risky than Mackenzie Large. It trades about 0.1 of its potential returns per unit of risk. Mackenzie Large Cap is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 14,773 in Mackenzie Large Cap on September 5, 2024 and sell it today you would earn a total of 9,828 from holding Mackenzie Large Cap or generate 66.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Manulife Multifactor Canadian vs. Mackenzie Large Cap
Performance |
| Timeline |
| Manulife Multifactor |
| Mackenzie Large Cap |
Manulife Multifactor and Mackenzie Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Manulife Multifactor and Mackenzie Large
The main advantage of trading using opposite Manulife Multifactor and Mackenzie Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Manulife Multifactor position performs unexpectedly, Mackenzie Large 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 Mackenzie Large will offset losses from the drop in Mackenzie Large's long position.The idea behind Manulife Multifactor Canadian and Mackenzie Large Cap 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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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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