Correlation Between Perkins Small and John Hancock

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

Diversification Opportunities for Perkins Small and John Hancock

0.91

Correlation Coefficient

Perkins Small  John Hancock

Almost no diversification

The 3 months correlation between Perkins and John is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Perkins Small Cap and John Hancock Disciplined in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Hancock Disciplined and Perkins 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 Perkins 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 Disciplined has no effect on the direction of Perkins Small i.e., Perkins Small and John Hancock go up and down completely randomly.

Pair Corralation between Perkins Small and John Hancock

Assuming the 90 days horizon Perkins Small Cap is expected to under-perform the John Hancock. In addition to that, Perkins Small is 2.19 times more volatile than John Hancock Disciplined. It trades about -0.01 of its total potential returns per unit of risk. John Hancock Disciplined is currently generating about 0.13 per unit of volatility. If you would invest  2,955  in John Hancock Disciplined on September 12, 2024 and sell it today you would earn a total of  202.00  from holding John Hancock Disciplined or generate 6.84% return on investment over 90 days.

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

Perkins Small Cap  vs.  John Hancock Disciplined

Perkins Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

John Hancock Disciplined

Risk-Adjusted Performance

10 of 100

Good

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

Pair Trading with Perkins Small and John Hancock

The main advantage of trading using opposite Perkins Small and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Perkins 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 Perkins Small Cap and John Hancock Disciplined 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.