Correlation Between Globe Life and Manulife Financial

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

By analyzing existing cross correlation between Globe Life and Manulife Financial Corp, you can compare the effects of market volatilities on Globe Life 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 Globe Life with a short position of Manulife Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Globe Life and Manulife Financial.

Diversification Opportunities for Globe Life and Manulife Financial

0.15

Correlation Coefficient

Globe Life  Manulife Financial

Average diversification

The 3 months correlation between Globe and Manulife is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Globe Life 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 Globe Life 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 Globe Life 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 Globe Life i.e., Globe Life and Manulife Financial go up and down completely randomly.

Pair Corralation between Globe Life and Manulife Financial

Allowing for the 90-day total investment horizon Globe Life is expected to under-perform the Manulife Financial. In addition to that, Globe Life is 12.15 times more volatile than Manulife Financial Corp. It trades about -0.03 of its total potential returns per unit of risk. Manulife Financial Corp is currently generating about -0.05 per unit of volatility. If you would invest  2,430  in Manulife Financial Corp on February 4, 2024 and sell it today you would lose (29.00) from holding Manulife Financial Corp or give up 1.19% of portfolio value over 90 days.

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

Globe Life  vs.  Manulife Financial Corp

Globe Life

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Globe Life has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Manulife Financial Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial Corp are ranked lower than 7 (%) 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 June 2024.

Pair Trading with Globe Life and Manulife Financial

The main advantage of trading using opposite Globe Life and Manulife Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globe Life 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.

The idea behind Globe Life and Manulife Financial Corp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.