Correlation Between Cullen Small and John Hancock
Can any of the company-specific risk be diversified away by investing in both Cullen Small 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 Cullen Small and John Hancock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cullen Small Cap and John Hancock Financial, you can compare the effects of market volatilities on Cullen Small 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 Cullen Small with a short position of John Hancock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cullen Small and John Hancock.
Diversification Opportunities for Cullen Small and John Hancock
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cullen and John is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Cullen Small Cap and John Hancock Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Hancock Financial and Cullen Small 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 Cullen Small Cap 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 Financial has no effect on the direction of Cullen Small i.e., Cullen Small and John Hancock go up and down completely randomly.
Pair Corralation between Cullen Small and John Hancock
Assuming the 90 days horizon Cullen Small is expected to generate 1.88 times less return on investment than John Hancock. But when comparing it to its historical volatility, Cullen Small Cap is 1.18 times less risky than John Hancock. It trades about 0.05 of its potential returns per unit of risk. John Hancock Financial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,487 in John Hancock Financial on September 2, 2024 and sell it today you would earn a total of 1,453 from holding John Hancock Financial or generate 58.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cullen Small Cap vs. John Hancock Financial
Performance |
| Timeline |
| Cullen Small Cap |
| John Hancock Financial |
Cullen Small and John Hancock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cullen Small and John Hancock
The main advantage of trading using opposite Cullen Small and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cullen Small 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.| Cullen Small vs. Lifestyle Ii Moderate | Cullen Small vs. Dimensional Retirement Income | Cullen Small vs. Franklin Lifesmart Retirement | Cullen Small vs. Calvert Moderate Allocation |
| John Hancock vs. Tekla Life Sciences | John Hancock vs. Tekla World Healthcare | John Hancock vs. Tekla Healthcare Opportunities | John Hancock vs. Royce Value Closed |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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