Correlation Between Dimensional Small and John Hancock

Can any of the company-specific risk be diversified away by investing in both Dimensional 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 Dimensional 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 Dimensional Small Cap and John Hancock Multifactor, you can compare the effects of market volatilities on Dimensional 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 Dimensional Small with a short position of John Hancock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional Small and John Hancock.

Diversification Opportunities for Dimensional Small and John Hancock

0.93

Correlation Coefficient

Dimensional Small  John Hancock

Almost no diversification

The 3 months correlation between Dimensional and John is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional Small Cap and John Hancock Multifactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Hancock Multifactor and Dimensional 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 Dimensional 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 Multifactor has no effect on the direction of Dimensional Small i.e., Dimensional Small and John Hancock go up and down completely randomly.

Pair Corralation between Dimensional Small and John Hancock

Given the investment horizon of 90 days Dimensional Small Cap is expected to generate 1.06 times more return on investment than John Hancock. However, Dimensional Small is 1.06 times more volatile than John Hancock Multifactor. It trades about 0.01 of its potential returns per unit of risk. John Hancock Multifactor is currently generating about -0.01 per unit of risk. If you would invest  6,527  in Dimensional Small Cap on October 12, 2024 and sell it today you would earn a total of  5.00  from holding Dimensional Small Cap or generate 0.08% return on investment over 90 days.

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

Dimensional Small Cap  vs.  John Hancock Multifactor

Dimensional Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Dimensional Small is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

John Hancock Multifactor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days John Hancock Multifactor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, John Hancock is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dimensional Small and John Hancock

The main advantage of trading using opposite Dimensional Small and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimensional 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 Dimensional Small Cap and John Hancock Multifactor 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.