Correlation Between John Hancock and Davis Financial
Can any of the company-specific risk be diversified away by investing in both John Hancock and Davis Financial 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 Davis Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between John Hancock Funds and Davis Financial Fund, you can compare the effects of market volatilities on John Hancock and Davis Financial 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 Davis Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of John Hancock and Davis Financial.
Diversification Opportunities for John Hancock and Davis Financial
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between John and Davis is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Funds and Davis Financial Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis Financial 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 Funds are associated (or correlated) with Davis Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis Financial has no effect on the direction of John Hancock i.e., John Hancock and Davis Financial go up and down completely randomly.
Pair Corralation between John Hancock and Davis Financial
Assuming the 90 days horizon John Hancock is expected to generate 2.09 times less return on investment than Davis Financial. But when comparing it to its historical volatility, John Hancock Funds is 1.64 times less risky than Davis Financial. It trades about 0.12 of its potential returns per unit of risk. Davis Financial Fund is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 5,931 in Davis Financial Fund on September 3, 2024 and sell it today you would earn a total of 1,455 from holding Davis Financial Fund or generate 24.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
John Hancock Funds vs. Davis Financial Fund
Performance |
| Timeline |
| John Hancock Funds |
| Davis Financial |
John Hancock and Davis Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with John Hancock and Davis Financial
The main advantage of trading using opposite John Hancock and Davis Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if John Hancock position performs unexpectedly, Davis Financial 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 Davis Financial will offset losses from the drop in Davis Financial's long position.| John Hancock vs. T Rowe Price | John Hancock vs. T Rowe Price | John Hancock vs. T Rowe Price | John Hancock vs. T Rowe Price |
| Davis Financial vs. Elfun Government Money | Davis Financial vs. Matson Money Equity | Davis Financial vs. Dws Government Money | Davis Financial vs. Janus 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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