Correlation Between John Hancock and Absolute Convertible
Can any of the company-specific risk be diversified away by investing in both John Hancock and Absolute Convertible 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 Absolute Convertible into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between John Hancock Mid and Absolute Convertible Arbitrage, you can compare the effects of market volatilities on John Hancock and Absolute Convertible 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 Absolute Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of John Hancock and Absolute Convertible.
Diversification Opportunities for John Hancock and Absolute Convertible
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between John and Absolute is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Mid and Absolute Convertible Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Convertible 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 Mid are associated (or correlated) with Absolute Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Convertible has no effect on the direction of John Hancock i.e., John Hancock and Absolute Convertible go up and down completely randomly.
Pair Corralation between John Hancock and Absolute Convertible
Assuming the 90 days horizon John Hancock Mid is expected to generate 10.02 times more return on investment than Absolute Convertible. However, John Hancock is 10.02 times more volatile than Absolute Convertible Arbitrage. It trades about 0.21 of its potential returns per unit of risk. Absolute Convertible Arbitrage is currently generating about 0.15 per unit of risk. If you would invest 1,451 in John Hancock Mid on November 3, 2024 and sell it today you would earn a total of 554.00 from holding John Hancock Mid or generate 38.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
John Hancock Mid vs. Absolute Convertible Arbitrage
Performance |
| Timeline |
| John Hancock Mid |
| Absolute Convertible |
John Hancock and Absolute Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with John Hancock and Absolute Convertible
The main advantage of trading using opposite John Hancock and Absolute Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if John Hancock position performs unexpectedly, Absolute Convertible 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 Absolute Convertible will offset losses from the drop in Absolute Convertible's long position.| John Hancock vs. John Hancock Global | John Hancock vs. John Hancock Focused | John Hancock vs. John Hancock Global |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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