Correlation Between Power Financial and Manulife Financial
Can any of the company-specific risk be diversified away by investing in both Power Financial and Manulife 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 Power Financial and Manulife Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Financial 51 and Manulife Financial Corp, you can compare the effects of market volatilities on Power Financial and Manulife 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 Power Financial with a short position of Manulife Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Financial and Manulife Financial.
Diversification Opportunities for Power Financial and Manulife Financial
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Power and Manulife is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Power Financial 51 and Manulife Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Financial Corp and Power 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 Power Financial 51 are associated (or correlated) with Manulife Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Financial Corp has no effect on the direction of Power Financial i.e., Power Financial and Manulife Financial go up and down completely randomly.
Pair Corralation between Power Financial and Manulife Financial
Assuming the 90 days trading horizon Power Financial is expected to generate 9.47 times less return on investment than Manulife Financial. But when comparing it to its historical volatility, Power Financial 51 is 1.37 times less risky than Manulife Financial. It trades about 0.07 of its potential returns per unit of risk. Manulife Financial Corp is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest 2,108 in Manulife Financial Corp on October 20, 2024 and sell it today you would earn a total of 172.00 from holding Manulife Financial Corp or generate 8.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Power Financial 51 vs. Manulife Financial Corp
Performance |
| Timeline |
| Power Financial 51 |
| Manulife Financial Corp |
Power Financial and Manulife Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power Financial and Manulife Financial
The main advantage of trading using opposite Power Financial and Manulife Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Financial position performs unexpectedly, Manulife 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 Manulife Financial will offset losses from the drop in Manulife Financial's long position.| Power Financial vs. Manulife Financial Corp | Power Financial vs. Manulife Fin Non | Power Financial vs. Manulife Financial Corp | Power Financial vs. Manulife Financial Corp |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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