Correlation Between John Hancock and Royce Opportunity

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

By analyzing existing cross correlation between John Hancock Income and Royce Opportunity Fund, you can compare the effects of market volatilities on John Hancock and Royce Opportunity 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 Royce Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of John Hancock and Royce Opportunity.

Diversification Opportunities for John Hancock and Royce Opportunity

-0.15

Correlation Coefficient

John Hancock  Royce Opportunity

Good diversification

The 3 months correlation between John and Royce is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Income and Royce Opportunity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Opportunity 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 Income are associated (or correlated) with Royce Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Opportunity has no effect on the direction of John Hancock i.e., John Hancock and Royce Opportunity go up and down completely randomly.

Pair Corralation between John Hancock and Royce Opportunity

Assuming the 90 days horizon John Hancock Income is expected to generate 0.08 times more return on investment than Royce Opportunity. However, John Hancock Income is 12.96 times less risky than Royce Opportunity. It trades about -0.04 of its potential returns per unit of risk. Royce Opportunity Fund is currently generating about -0.17 per unit of risk. If you would invest  586.00  in John Hancock Income on September 20, 2024 and sell it today you would lose (1.00) from holding John Hancock Income or give up 0.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

John Hancock Income  vs.  Royce Opportunity Fund

John Hancock Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Royce Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royce Opportunity Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Royce Opportunity 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 Royce Opportunity

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

The idea behind John Hancock Income and Royce Opportunity Fund 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.