Correlation Between Metro Retail and Manulife Financial

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

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

Diversification Opportunities for Metro Retail and Manulife Financial

-0.32

Correlation Coefficient

Metro Retail  Manulife Financial

Very good diversification

The 3 months correlation between Metro and Manulife is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Metro Retail Stores 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 Metro Retail 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 Metro Retail Stores 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 Metro Retail i.e., Metro Retail and Manulife Financial go up and down completely randomly.

Pair Corralation between Metro Retail and Manulife Financial

Assuming the 90 days trading horizon Metro Retail Stores is expected to under-perform the Manulife Financial. But the stock apears to be less risky and, when comparing its historical volatility, Metro Retail Stores is 2.29 times less risky than Manulife Financial. The stock trades about -0.09 of its potential returns per unit of risk. The Manulife Financial Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  151,572  in Manulife Financial Corp on April 23, 2025 and sell it today you would earn a total of  13,428  from holding Manulife Financial Corp or generate 8.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	76.27%
Values	Daily Returns

Metro Retail Stores  vs.  Manulife Financial Corp

Metro Retail Stores

Risk-Adjusted Performance

Very Weak

Over the last 90 days Metro Retail Stores has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Manulife Financial Corp

Risk-Adjusted Performance

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 unsteady technical and fundamental indicators, Manulife Financial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metro Retail and Manulife Financial

The main advantage of trading using opposite Metro Retail and Manulife Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro Retail 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 Metro Retail Stores 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 Transaction History module to view history of all your transactions and understand their impact on performance.