Correlation Between Manulife Financial and Fairfax Financial
Can any of the company-specific risk be diversified away by investing in both Manulife Financial and Fairfax Financial 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 Fairfax Financial 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 Fairfax Financial Holdings, you can compare the effects of market volatilities on Manulife Financial and Fairfax Financial 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 Fairfax Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manulife Financial and Fairfax Financial.
Diversification Opportunities for Manulife Financial and Fairfax Financial
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Manulife and Fairfax is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp and Fairfax Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairfax Financial 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 Fairfax Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairfax Financial has no effect on the direction of Manulife Financial i.e., Manulife Financial and Fairfax Financial go up and down completely randomly.
Pair Corralation between Manulife Financial and Fairfax Financial
Assuming the 90 days trading horizon Manulife Financial Corp is expected to under-perform the Fairfax Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, Manulife Financial Corp is 1.6 times less risky than Fairfax Financial. The preferred stock trades about -0.12 of its potential returns per unit of risk. The Fairfax Financial Holdings is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 2,225 in Fairfax Financial Holdings on September 1, 2024 and sell it today you would earn a total of 175.00 from holding Fairfax Financial Holdings or generate 7.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Manulife Financial Corp vs. Fairfax Financial Holdings
Performance |
| Timeline |
| Manulife Financial Corp |
| Fairfax Financial |
Manulife Financial and Fairfax Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Manulife Financial and Fairfax Financial
The main advantage of trading using opposite Manulife Financial and Fairfax Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Manulife Financial position performs unexpectedly, Fairfax Financial 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 Fairfax Financial will offset losses from the drop in Fairfax Financial's long position.| Manulife Financial vs. Fairfax Financial Holdings | Manulife Financial vs. iShares Canadian HYBrid | Manulife Financial vs. Brompton European Dividend | Manulife Financial vs. Solar Alliance Energy |
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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