Correlation Between Davis Financial and John Hancock

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

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

Diversification Opportunities for Davis Financial and John Hancock

0.91

Correlation Coefficient

Davis Financial  John Hancock

Almost no diversification

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

Pair Corralation between Davis Financial and John Hancock

Assuming the 90 days horizon Davis Financial is expected to generate 18.74 times less return on investment than John Hancock. In addition to that, Davis Financial is 1.13 times more volatile than John Hancock Mid. It trades about 0.01 of its total potential returns per unit of risk. John Hancock Mid is currently generating about 0.25 per unit of volatility. If you would invest  1,656  in John Hancock Mid on September 19, 2024 and sell it today you would earn a total of  215.00  from holding John Hancock Mid or generate 12.98% return on investment over 90 days.

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

Davis Financial Fund  vs.  John Hancock Mid

Davis Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Financial Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Davis Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

John Hancock Mid

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in John Hancock Mid are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, John Hancock showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Davis Financial and John Hancock

The main advantage of trading using opposite Davis Financial and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Financial 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 Davis Financial Fund and John Hancock Mid 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.