Correlation Between John Hancock and Royce Small-cap
Can any of the company-specific risk be diversified away by investing in both John Hancock and Royce Small-cap 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 John Hancock and Royce Small-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between John Hancock Financial and Royce Small Cap Value, you can compare the effects of market volatilities on John Hancock and Royce Small-cap 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 John Hancock with a short position of Royce Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of John Hancock and Royce Small-cap.
Diversification Opportunities for John Hancock and Royce Small-cap
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between John and Royce is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Financial and Royce Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Small Cap and John Hancock 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 John Hancock Financial are associated (or correlated) with Royce Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Small Cap has no effect on the direction of John Hancock i.e., John Hancock and Royce Small-cap go up and down completely randomly.
Pair Corralation between John Hancock and Royce Small-cap
Considering the 90-day investment horizon John Hancock Financial is expected to generate 1.46 times more return on investment than Royce Small-cap. However, John Hancock is 1.46 times more volatile than Royce Small Cap Value. It trades about 0.04 of its potential returns per unit of risk. Royce Small Cap Value is currently generating about 0.05 per unit of risk. If you would invest 2,867 in John Hancock Financial on September 2, 2024 and sell it today you would earn a total of 1,073 from holding John Hancock Financial or generate 37.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
John Hancock Financial vs. Royce Small Cap Value
Performance |
| Timeline |
| John Hancock Financial |
| Royce Small Cap |
John Hancock and Royce Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with John Hancock and Royce Small-cap
The main advantage of trading using opposite John Hancock and Royce Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if John Hancock position performs unexpectedly, Royce Small-cap 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 Royce Small-cap will offset losses from the drop in Royce Small-cap's long position.| John Hancock vs. Tekla Life Sciences | John Hancock vs. Tekla World Healthcare | John Hancock vs. Tekla Healthcare Opportunities | John Hancock vs. Royce Value Closed |
| Royce Small-cap vs. Harbor International Fund | Royce Small-cap vs. John Hancock Disciplined | Royce Small-cap vs. Ridgeworth Ceredex Small | Royce Small-cap vs. Jpmorgan Value Advantage |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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