Correlation Between John Hancock and Eafe Choice

Can any of the company-specific risk be diversified away by investing in both John Hancock and Eafe Choice 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 John Hancock and Eafe Choice into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between John Hancock Financial and The Eafe Choice, you can compare the effects of market volatilities on John Hancock and Eafe Choice 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 John Hancock with a short position of Eafe Choice. Check out your portfolio center. Please also check ongoing floating volatility patterns of John Hancock and Eafe Choice.

Diversification Opportunities for John Hancock and Eafe Choice

0.04

Correlation Coefficient

John Hancock  Eafe Choice

Significant diversification

The 3 months correlation between John and Eafe is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Financial and The Eafe Choice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eafe Choice and John Hancock 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 John Hancock Financial are associated (or correlated) with Eafe Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eafe Choice has no effect on the direction of John Hancock i.e., John Hancock and Eafe Choice go up and down completely randomly.

Pair Corralation between John Hancock and Eafe Choice

Considering the 90-day investment horizon John Hancock Financial is expected to generate 1.52 times more return on investment than Eafe Choice. However, John Hancock is 1.52 times more volatile than The Eafe Choice. It trades about 0.1 of its potential returns per unit of risk. The Eafe Choice is currently generating about 0.0 per unit of risk. If you would invest  2,738  in John Hancock Financial on October 25, 2024 and sell it today you would earn a total of  979.00  from holding John Hancock Financial or generate 35.76% return on investment over 90 days.

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

John Hancock Financial  vs.  The Eafe Choice

John Hancock Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in John Hancock Financial are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of very conflicting basic indicators, John Hancock displayed solid returns over the last few months and may actually be approaching a breakup point.

Eafe Choice

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Eafe Choice has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Eafe Choice is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with John Hancock and Eafe Choice

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

The idea behind John Hancock Financial and The Eafe Choice 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.