Correlation Between Manulife Financial and Basic Energy
Can any of the company-specific risk be diversified away by investing in both Manulife Financial and Basic Energy 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 Basic Energy 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 Basic Energy Corp, you can compare the effects of market volatilities on Manulife Financial and Basic Energy 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 Basic Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manulife Financial and Basic Energy.
Diversification Opportunities for Manulife Financial and Basic Energy
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Manulife and Basic is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp and Basic Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Energy Corp 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 Basic Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Energy Corp has no effect on the direction of Manulife Financial i.e., Manulife Financial and Basic Energy go up and down completely randomly.
Pair Corralation between Manulife Financial and Basic Energy
Assuming the 90 days trading horizon Manulife Financial Corp is expected to generate 1.94 times more return on investment than Basic Energy. However, Manulife Financial is 1.94 times more volatile than Basic Energy Corp. It trades about 0.11 of its potential returns per unit of risk. Basic Energy Corp is currently generating about 0.02 per unit of risk. If you would invest 176,237 in Manulife Financial Corp on September 13, 2024 and sell it today you would earn a total of 13,663 from holding Manulife Financial Corp or generate 7.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 68.18% |
| Values | Daily Returns |
Manulife Financial Corp vs. Basic Energy Corp
Performance |
| Timeline |
| Manulife Financial Corp |
| Basic Energy Corp |
Manulife Financial and Basic Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Manulife Financial and Basic Energy
The main advantage of trading using opposite Manulife Financial and Basic Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Manulife Financial position performs unexpectedly, Basic Energy 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 Basic Energy will offset losses from the drop in Basic Energy's long position.| Manulife Financial vs. Sun Life Financial | Manulife Financial vs. National Reinsurance | Manulife Financial vs. GT Capital Holdings | Manulife Financial vs. Allhome Corp |
| Basic Energy vs. Transpacific Broadband Group | Basic Energy vs. Century Pacific Food | Basic Energy vs. Apex Mining Co | Basic Energy vs. Top Frontier Investment |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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