Correlation Between Manulife Financial and Medical Facilities
Can any of the company-specific risk be diversified away by investing in both Manulife Financial and Medical Facilities 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 Medical Facilities 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 Medical Facilities, you can compare the effects of market volatilities on Manulife Financial and Medical Facilities 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 Medical Facilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manulife Financial and Medical Facilities.
Diversification Opportunities for Manulife Financial and Medical Facilities
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Manulife and Medical is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp and Medical Facilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Facilities 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 Medical Facilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Facilities has no effect on the direction of Manulife Financial i.e., Manulife Financial and Medical Facilities go up and down completely randomly.
Pair Corralation between Manulife Financial and Medical Facilities
Assuming the 90 days trading horizon Manulife Financial is expected to generate 2.3 times less return on investment than Medical Facilities. But when comparing it to its historical volatility, Manulife Financial Corp is 1.48 times less risky than Medical Facilities. It trades about 0.07 of its potential returns per unit of risk. Medical Facilities is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 744.00 in Medical Facilities on September 12, 2024 and sell it today you would earn a total of 809.00 from holding Medical Facilities or generate 108.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Manulife Financial Corp vs. Medical Facilities
Performance |
| Timeline |
| Manulife Financial Corp |
| Medical Facilities |
Manulife Financial and Medical Facilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Manulife Financial and Medical Facilities
The main advantage of trading using opposite Manulife Financial and Medical Facilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Manulife Financial position performs unexpectedly, Medical Facilities 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 Medical Facilities will offset losses from the drop in Medical Facilities' long position.The idea behind Manulife Financial Corp and Medical Facilities 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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