Correlation Between Manulife Financial and Prudential Plc

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

By analyzing existing cross correlation between Manulife Financial and Prudential plc, you can compare the effects of market volatilities on Manulife Financial and Prudential Plc 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 Prudential Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Manulife Financial and Prudential Plc.

Diversification Opportunities for Manulife Financial and Prudential Plc

0.4

Correlation Coefficient

Manulife Financial  Prudential Plc

Very weak diversification

The 3 months correlation between Manulife and Prudential is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Manulife Financial and Prudential plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential plc 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 are associated (or correlated) with Prudential Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential plc has no effect on the direction of Manulife Financial i.e., Manulife Financial and Prudential Plc go up and down completely randomly.

Pair Corralation between Manulife Financial and Prudential Plc

Assuming the 90 days horizon Manulife Financial is expected to generate 1.67 times less return on investment than Prudential Plc. But when comparing it to its historical volatility, Manulife Financial is 1.27 times less risky than Prudential Plc. It trades about 0.1 of its potential returns per unit of risk. Prudential plc is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  920.00  in Prudential plc on April 20, 2025 and sell it today you would earn a total of  140.00  from holding Prudential plc or generate 15.22% return on investment over 90 days.

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

Manulife Financial  vs.  Prudential plc

Manulife Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Manulife Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Manulife Financial may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Prudential plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential plc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Prudential Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Manulife Financial and Prudential Plc

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

The idea behind Manulife Financial and Prudential plc 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 Global Correlations module to find global opportunities by holding instruments from different markets.