Correlation Between Rational Special and John Hancock

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

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

Diversification Opportunities for Rational Special and John Hancock

0.79

Correlation Coefficient

Rational Special  John Hancock

Poor diversification

The 3 months correlation between Rational and John is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Rational Special Situations and John Hancock Variable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Hancock Variable and Rational Special 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 Rational Special Situations 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 Variable has no effect on the direction of Rational Special i.e., Rational Special and John Hancock go up and down completely randomly.

Pair Corralation between Rational Special and John Hancock

Assuming the 90 days horizon Rational Special Situations is expected to under-perform the John Hancock. But the mutual fund apears to be less risky and, when comparing its historical volatility, Rational Special Situations is 9.75 times less risky than John Hancock. The mutual fund trades about -0.07 of its potential returns per unit of risk. The John Hancock Variable is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,007  in John Hancock Variable on September 22, 2024 and sell it today you would earn a total of  39.00  from holding John Hancock Variable or generate 1.94% return on investment over 90 days.

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

Rational Special Situations  vs.  John Hancock Variable

Rational Special Sit

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rational Special Situations are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Rational Special is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

John Hancock Variable

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Rational Special and John Hancock

The main advantage of trading using opposite Rational Special and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rational Special 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 Rational Special Situations and John Hancock Variable 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.