Correlation Between Manulife Financial and Bombardier
Can any of the company-specific risk be diversified away by investing in both Manulife Financial and Bombardier 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 Bombardier 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 Bombardier, you can compare the effects of market volatilities on Manulife Financial and Bombardier 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 Bombardier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manulife Financial and Bombardier.
Diversification Opportunities for Manulife Financial and Bombardier
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Manulife and Bombardier is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp and Bombardier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bombardier 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 Bombardier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bombardier has no effect on the direction of Manulife Financial i.e., Manulife Financial and Bombardier go up and down completely randomly.
Pair Corralation between Manulife Financial and Bombardier
Assuming the 90 days trading horizon Manulife Financial Corp is expected to generate 0.4 times more return on investment than Bombardier. However, Manulife Financial Corp is 2.5 times less risky than Bombardier. It trades about 0.16 of its potential returns per unit of risk. Bombardier is currently generating about 0.06 per unit of risk. If you would invest 2,440 in Manulife Financial Corp on August 26, 2024 and sell it today you would earn a total of 2,097 from holding Manulife Financial Corp or generate 85.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Manulife Financial Corp vs. Bombardier
Performance |
| Timeline |
| Manulife Financial Corp |
| Bombardier |
Manulife Financial and Bombardier Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Manulife Financial and Bombardier
The main advantage of trading using opposite Manulife Financial and Bombardier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Manulife Financial position performs unexpectedly, Bombardier 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 Bombardier will offset losses from the drop in Bombardier's long position.| Manulife Financial vs. Bank of Nova | Manulife Financial vs. Sun Life Financial | Manulife Financial vs. Toronto Dominion Bank | Manulife Financial vs. Royal Bank of |
| Bombardier vs. BlackBerry | Bombardier vs. Air Canada | Bombardier vs. Suncor Energy | Bombardier vs. Manulife Financial Corp |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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