Correlation Between Coca Cola and John Hancock
Can any of the company-specific risk be diversified away by investing in both Coca Cola 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 Coca Cola and John Hancock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Coca Cola and John Hancock Multifactor, you can compare the effects of market volatilities on Coca Cola 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 Coca Cola with a short position of John Hancock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and John Hancock.
Diversification Opportunities for Coca Cola and John Hancock
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Coca and John is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and John Hancock Multifactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Hancock Multifactor and Coca Cola 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 The Coca Cola 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 Multifactor has no effect on the direction of Coca Cola i.e., Coca Cola and John Hancock go up and down completely randomly.
Pair Corralation between Coca Cola and John Hancock
Allowing for the 90-day total investment horizon Coca Cola is expected to generate 1.85 times less return on investment than John Hancock. But when comparing it to its historical volatility, The Coca Cola is 1.1 times less risky than John Hancock. It trades about 0.06 of its potential returns per unit of risk. John Hancock Multifactor is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5,445 in John Hancock Multifactor on August 27, 2024 and sell it today you would earn a total of 960.00 from holding John Hancock Multifactor or generate 17.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. John Hancock Multifactor
Performance |
| Timeline |
| Coca Cola |
| John Hancock Multifactor |
Coca Cola and John Hancock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and John Hancock
The main advantage of trading using opposite Coca Cola and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola 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.The idea behind The Coca Cola and John Hancock Multifactor pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| John Hancock vs. Vanguard Mid Cap Index | John Hancock vs. Vanguard Extended Market | John Hancock vs. iShares Core SP | John Hancock vs. SPDR SP MIDCAP |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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