Correlation Between Exxon and John Hancock
Can any of the company-specific risk be diversified away by investing in both Exxon 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 Exxon and John Hancock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exxon Mobil Corp and John Hancock Multifactor, you can compare the effects of market volatilities on Exxon 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 Exxon with a short position of John Hancock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and John Hancock.
Diversification Opportunities for Exxon and John Hancock
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and John is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp 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 Exxon 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 Exxon Mobil Corp 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 Exxon i.e., Exxon and John Hancock go up and down completely randomly.
Pair Corralation between Exxon and John Hancock
Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 1.38 times more return on investment than John Hancock. However, Exxon is 1.38 times more volatile than John Hancock Multifactor. It trades about 0.08 of its potential returns per unit of risk. John Hancock Multifactor is currently generating about 0.1 per unit of risk. If you would invest 10,201 in Exxon Mobil Corp on August 27, 2024 and sell it today you would earn a total of 1,978 from holding Exxon Mobil Corp or generate 19.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exxon Mobil Corp vs. John Hancock Multifactor
Performance |
| Timeline |
| Exxon Mobil Corp |
| John Hancock Multifactor |
Exxon and John Hancock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and John Hancock
The main advantage of trading using opposite Exxon and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon 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 Exxon Mobil Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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