Correlation Between John Hancock and Pax Small

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

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

Diversification Opportunities for John Hancock and Pax Small

0.89

Correlation Coefficient

John Hancock  Pax Small

Very poor diversification

The 3 months correlation between John and Pax is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Esg and Pax Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Small Cap 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 Esg are associated (or correlated) with Pax Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Small Cap has no effect on the direction of John Hancock i.e., John Hancock and Pax Small go up and down completely randomly.

Pair Corralation between John Hancock and Pax Small

Assuming the 90 days horizon John Hancock Esg is expected to generate 0.72 times more return on investment than Pax Small. However, John Hancock Esg is 1.4 times less risky than Pax Small. It trades about 0.1 of its potential returns per unit of risk. Pax Small Cap is currently generating about 0.06 per unit of risk. If you would invest  1,824  in John Hancock Esg on September 4, 2024 and sell it today you would earn a total of  784.00  from holding John Hancock Esg or generate 42.98% return on investment over 90 days.

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

John Hancock Esg  vs.  Pax Small Cap

John Hancock Esg

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in John Hancock Esg are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. 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.

Pax Small Cap

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pax Small Cap are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Pax Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with John Hancock and Pax Small

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

The idea behind John Hancock Esg and Pax Small Cap 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.