Correlation Between Manulife Finl and Clean Air

Can any of the company-specific risk be diversified away by investing in both Manulife Finl and Clean Air 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 Finl and Clean Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Manulife Finl Srs and Clean Air Metals, you can compare the effects of market volatilities on Manulife Finl and Clean Air 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 Finl with a short position of Clean Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manulife Finl and Clean Air.

Diversification Opportunities for Manulife Finl and Clean Air

0.49

Correlation Coefficient

Manulife Finl  Clean Air

Very weak diversification

The 3 months correlation between Manulife and Clean is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Finl Srs and Clean Air Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Air Metals and Manulife Finl 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 Finl Srs are associated (or correlated) with Clean Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Air Metals has no effect on the direction of Manulife Finl i.e., Manulife Finl and Clean Air go up and down completely randomly.

Pair Corralation between Manulife Finl and Clean Air

Assuming the 90 days trading horizon Manulife Finl Srs is expected to generate 0.05 times more return on investment than Clean Air. However, Manulife Finl Srs is 19.02 times less risky than Clean Air. It trades about -0.16 of its potential returns per unit of risk. Clean Air Metals is currently generating about -0.05 per unit of risk. If you would invest  2,028  in Manulife Finl Srs on July 19, 2024 and sell it today you would lose (27.00) from holding Manulife Finl Srs or give up 1.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Manulife Finl Srs  vs.  Clean Air Metals

Manulife Finl Srs

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Finl Srs are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Manulife Finl is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Clean Air Metals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Clean Air Metals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Clean Air showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Manulife Finl and Clean Air

The main advantage of trading using opposite Manulife Finl and Clean Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Manulife Finl position performs unexpectedly, Clean Air 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 Clean Air will offset losses from the drop in Clean Air's long position.

The idea behind Manulife Finl Srs and Clean Air Metals 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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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.