Correlation Between John Hancock and PIMCO RAFI
Can any of the company-specific risk be diversified away by investing in both John Hancock and PIMCO RAFI 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 PIMCO RAFI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between John Hancock Multifactor and PIMCO RAFI Dynamic, you can compare the effects of market volatilities on John Hancock and PIMCO RAFI 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 PIMCO RAFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of John Hancock and PIMCO RAFI.
Diversification Opportunities for John Hancock and PIMCO RAFI
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between John and PIMCO is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Multifactor and PIMCO RAFI Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO RAFI Dynamic 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 Multifactor are associated (or correlated) with PIMCO RAFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO RAFI Dynamic has no effect on the direction of John Hancock i.e., John Hancock and PIMCO RAFI go up and down completely randomly.
Pair Corralation between John Hancock and PIMCO RAFI
Given the investment horizon of 90 days John Hancock Multifactor is expected to generate 1.04 times more return on investment than PIMCO RAFI. However, John Hancock is 1.04 times more volatile than PIMCO RAFI Dynamic. It trades about 0.38 of its potential returns per unit of risk. PIMCO RAFI Dynamic is currently generating about 0.36 per unit of risk. If you would invest 6,879 in John Hancock Multifactor on September 1, 2024 and sell it today you would earn a total of 446.00 from holding John Hancock Multifactor or generate 6.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
John Hancock Multifactor vs. PIMCO RAFI Dynamic
Performance |
| Timeline |
| John Hancock Multifactor |
| PIMCO RAFI Dynamic |
John Hancock and PIMCO RAFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with John Hancock and PIMCO RAFI
The main advantage of trading using opposite John Hancock and PIMCO RAFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if John Hancock position performs unexpectedly, PIMCO RAFI 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 PIMCO RAFI will offset losses from the drop in PIMCO RAFI's long position.| John Hancock vs. John Hancock Multifactor | John Hancock vs. JPMorgan Diversified Return | John Hancock vs. iShares Equity Factor | John Hancock vs. John Hancock Multifactor |
| PIMCO RAFI vs. PIMCO RAFI Dynamic | PIMCO RAFI vs. PIMCO RAFI Dynamic | PIMCO RAFI vs. JPMorgan Diversified Return | PIMCO RAFI vs. JPMorgan Diversified Return |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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