Correlation Between Manulife Financial and Lincoln National

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

Diversification Opportunities for Manulife Financial and Lincoln National

0.79

Correlation Coefficient

Manulife Financial  Lincoln National

Poor diversification

The 3 months correlation between Manulife and Lincoln is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial Corp and Lincoln National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln National 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 Lincoln National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln National has no effect on the direction of Manulife Financial i.e., Manulife Financial and Lincoln National go up and down completely randomly.

Pair Corralation between Manulife Financial and Lincoln National

Considering the 90-day investment horizon Manulife Financial Corp is expected to generate 0.52 times more return on investment than Lincoln National. However, Manulife Financial Corp is 1.93 times less risky than Lincoln National. It trades about 0.1 of its potential returns per unit of risk. Lincoln National is currently generating about 0.02 per unit of risk. If you would invest  1,651  in Manulife Financial Corp on September 27, 2024 and sell it today you would earn a total of  1,416  from holding Manulife Financial Corp or generate 85.77% return on investment over 90 days.

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

Manulife Financial Corp  vs.  Lincoln National

Manulife Financial Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Manulife Financial is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Lincoln National

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln National are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lincoln National is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Manulife Financial and Lincoln National

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

The idea behind Manulife Financial Corp and Lincoln National 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.