Correlation Between Manulife Financial and Telefonaktiebolaget

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

Diversification Opportunities for Manulife Financial and Telefonaktiebolaget

-0.45

Correlation Coefficient

Manulife Financial  Telefonaktiebolaget

Very good diversification

The 3 months correlation between Manulife and Telefonaktiebolaget is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget 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 Telefonaktiebolaget. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonaktiebolaget has no effect on the direction of Manulife Financial i.e., Manulife Financial and Telefonaktiebolaget go up and down completely randomly.

Pair Corralation between Manulife Financial and Telefonaktiebolaget

Considering the 90-day investment horizon Manulife Financial Corp is expected to generate 0.83 times more return on investment than Telefonaktiebolaget. However, Manulife Financial Corp is 1.2 times less risky than Telefonaktiebolaget. It trades about 0.07 of its potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about 0.03 per unit of risk. If you would invest  1,898  in Manulife Financial Corp on January 26, 2024 and sell it today you would earn a total of  450.00  from holding Manulife Financial Corp or generate 23.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Manulife Financial Corp  vs.  Telefonaktiebolaget LM Ericsso

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.

Telefonaktiebolaget

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telefonaktiebolaget LM Ericsson has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Telefonaktiebolaget is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Manulife Financial and Telefonaktiebolaget

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

The idea behind Manulife Financial Corp and Telefonaktiebolaget LM Ericsson 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.