Correlation Between PIMCO RAFI and John Hancock

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

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

Diversification Opportunities for PIMCO RAFI and John Hancock

-0.54

Correlation Coefficient

PIMCO RAFI  John Hancock

Excellent diversification

The 3 months correlation between PIMCO and John is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding PIMCO RAFI Dynamic 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 PIMCO RAFI 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 PIMCO RAFI Dynamic 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 PIMCO RAFI i.e., PIMCO RAFI and John Hancock go up and down completely randomly.

Pair Corralation between PIMCO RAFI and John Hancock

Given the investment horizon of 90 days PIMCO RAFI Dynamic is expected to under-perform the John Hancock. In addition to that, PIMCO RAFI is 1.09 times more volatile than John Hancock Multifactor. It trades about -0.04 of its total potential returns per unit of risk. John Hancock Multifactor is currently generating about 0.17 per unit of volatility. If you would invest  6,764  in John Hancock Multifactor on September 13, 2024 and sell it today you would earn a total of  481.00  from holding John Hancock Multifactor or generate 7.11% return on investment over 90 days.

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

PIMCO RAFI Dynamic  vs.  John Hancock Multifactor

PIMCO RAFI Dynamic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIMCO RAFI Dynamic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, PIMCO RAFI is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

John Hancock Multifactor

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in John Hancock Multifactor are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating primary indicators, John Hancock may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PIMCO RAFI and John Hancock

The main advantage of trading using opposite PIMCO RAFI and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PIMCO RAFI 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 PIMCO RAFI Dynamic 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.