Correlation Between Manulife Financial and Allstate

Can any of the company-specific risk be diversified away by investing in both Manulife Financial and Allstate 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 Allstate 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 The Allstate, you can compare the effects of market volatilities on Manulife Financial and Allstate 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 Allstate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manulife Financial and Allstate.

Diversification Opportunities for Manulife Financial and Allstate

0.54

Correlation Coefficient

Manulife Financial  Allstate

Very weak diversification

The 3 months correlation between Manulife and Allstate is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate 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 Allstate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allstate has no effect on the direction of Manulife Financial i.e., Manulife Financial and Allstate go up and down completely randomly.

Pair Corralation between Manulife Financial and Allstate

Considering the 90-day investment horizon Manulife Financial is expected to generate 1.19 times less return on investment than Allstate. In addition to that, Manulife Financial is 1.34 times more volatile than The Allstate. It trades about 0.08 of its total potential returns per unit of risk. The Allstate is currently generating about 0.13 per unit of volatility. If you would invest  15,746  in The Allstate on January 26, 2024 and sell it today you would earn a total of  1,481  from holding The Allstate or generate 9.41% 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.  The Allstate

Manulife Financial Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Manulife Financial may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Allstate

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Allstate are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Allstate may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Manulife Financial and Allstate

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

The idea behind Manulife Financial Corp and The Allstate 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.