Correlation Between Manulife Financial and CNO Financial
Can any of the company-specific risk be diversified away by investing in both Manulife Financial and CNO 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 CNO 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 CNO Financial Group, you can compare the effects of market volatilities on Manulife Financial and CNO 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 CNO Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manulife Financial and CNO Financial.
Diversification Opportunities for Manulife Financial and CNO Financial
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Manulife and CNO is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp and CNO Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNO Financial Group 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 CNO Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNO Financial Group has no effect on the direction of Manulife Financial i.e., Manulife Financial and CNO Financial go up and down completely randomly.
Pair Corralation between Manulife Financial and CNO Financial
Considering the 90-day investment horizon Manulife Financial Corp is expected to under-perform the CNO Financial. But the stock apears to be less risky and, when comparing its historical volatility, Manulife Financial Corp is 1.21 times less risky than CNO Financial. The stock trades about -0.13 of its potential returns per unit of risk. The CNO Financial Group is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 2,686 in CNO Financial Group on January 24, 2024 and sell it today you would lose (43.00) from holding CNO Financial Group or give up 1.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Manulife Financial Corp vs. CNO Financial Group
Performance |
| Timeline |
| Manulife Financial Corp |
| CNO Financial Group |
Manulife Financial and CNO Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Manulife Financial and CNO Financial
The main advantage of trading using opposite Manulife Financial and CNO Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Manulife Financial position performs unexpectedly, CNO 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 CNO Financial will offset losses from the drop in CNO Financial's long position.The idea behind Manulife Financial Corp and CNO Financial Group 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.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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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