Correlation Between Principal Spectrum and John Hancock

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

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

Diversification Opportunities for Principal Spectrum and John Hancock

0.45

Correlation Coefficient

Principal Spectrum  John Hancock

Very weak diversification

The 3 months correlation between Principal and John is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Principal Spectrum Preferred and John Hancock Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Hancock Preferred and Principal Spectrum 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 Principal Spectrum Preferred 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 Preferred has no effect on the direction of Principal Spectrum i.e., Principal Spectrum and John Hancock go up and down completely randomly.

Pair Corralation between Principal Spectrum and John Hancock

Given the investment horizon of 90 days Principal Spectrum Preferred is expected to generate 0.8 times more return on investment than John Hancock. However, Principal Spectrum Preferred is 1.25 times less risky than John Hancock. It trades about 0.23 of its potential returns per unit of risk. John Hancock Preferred is currently generating about 0.01 per unit of risk. If you would invest  1,860  in Principal Spectrum Preferred on November 28, 2024 and sell it today you would earn a total of  15.00  from holding Principal Spectrum Preferred or generate 0.81% return on investment over 90 days.

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

Principal Spectrum Preferred  vs.  John Hancock Preferred

Principal Spectrum

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Spectrum Preferred are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Principal Spectrum is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

John Hancock Preferred

Risk-Adjusted Performance

Weak

Over the last 90 days John Hancock Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, John Hancock is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Principal Spectrum and John Hancock

The main advantage of trading using opposite Principal Spectrum and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Principal Spectrum 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 Principal Spectrum Preferred and John Hancock Preferred 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..