Correlation Between Columbia Small and John Hancock

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

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

Diversification Opportunities for Columbia Small and John Hancock

0.8

Correlation Coefficient

Columbia Small  John Hancock

Very poor diversification

The 3 months correlation between Columbia and John is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Small Cap and John Hancock Variable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Hancock Variable and Columbia Small 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 Columbia Small Cap are associated (or correlated) with John Hancock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of John Hancock Variable has no effect on the direction of Columbia Small i.e., Columbia Small and John Hancock go up and down completely randomly.

Pair Corralation between Columbia Small and John Hancock

Assuming the 90 days horizon Columbia Small is expected to generate 2.69 times less return on investment than John Hancock. But when comparing it to its historical volatility, Columbia Small Cap is 1.06 times less risky than John Hancock. It trades about 0.05 of its potential returns per unit of risk. John Hancock Variable is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  972.00  in John Hancock Variable on September 22, 2024 and sell it today you would earn a total of  1,074  from holding John Hancock Variable or generate 110.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.57%
Values	Daily Returns

Columbia Small Cap  vs.  John Hancock Variable

Columbia Small Cap

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Columbia Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Columbia Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

John Hancock Variable

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in John Hancock Variable are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, John Hancock may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Columbia Small and John Hancock

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

The idea behind Columbia Small Cap and John Hancock Variable 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.