Correlation Between THE PHILIPPINE and Manulife Financial

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

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

Diversification Opportunities for THE PHILIPPINE and Manulife Financial

-0.42

Correlation Coefficient

THE PHILIPPINE  Manulife Financial

Very good diversification

The 3 months correlation between THE and Manulife is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding THE PHILIPPINE STOCK 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 THE PHILIPPINE 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 THE PHILIPPINE STOCK 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 THE PHILIPPINE i.e., THE PHILIPPINE and Manulife Financial go up and down completely randomly.

Pair Corralation between THE PHILIPPINE and Manulife Financial

Assuming the 90 days trading horizon THE PHILIPPINE is expected to generate 4.34 times less return on investment than Manulife Financial. But when comparing it to its historical volatility, THE PHILIPPINE STOCK is 3.99 times less risky than Manulife Financial. It trades about 0.05 of its potential returns per unit of risk. Manulife Financial Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  151,572  in Manulife Financial Corp on April 20, 2025 and sell it today you would earn a total of  10,428  from holding Manulife Financial Corp or generate 6.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	75.41%
Values	Daily Returns

THE PHILIPPINE STOCK  vs.  Manulife Financial Corp

Pair Trading with THE PHILIPPINE and Manulife Financial

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

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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.