Correlation Between Cullen Small and John Hancock

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Can any of the company-specific risk be diversified away by investing in both Cullen Small 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 Cullen Small and John Hancock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cullen Small Cap and John Hancock Financial, you can compare the effects of market volatilities on Cullen Small 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 Cullen Small with a short position of John Hancock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cullen Small and John Hancock.

Diversification Opportunities for Cullen Small and John Hancock

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Cullen and John is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Cullen Small Cap and John Hancock Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Hancock Financial and Cullen Small 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 Cullen Small Cap 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 Financial has no effect on the direction of Cullen Small i.e., Cullen Small and John Hancock go up and down completely randomly.

Pair Corralation between Cullen Small and John Hancock

Assuming the 90 days horizon Cullen Small is expected to generate 2.99 times less return on investment than John Hancock. In addition to that, Cullen Small is 1.04 times more volatile than John Hancock Financial. It trades about 0.06 of its total potential returns per unit of risk. John Hancock Financial is currently generating about 0.2 per unit of volatility. If you would invest  3,278  in John Hancock Financial on August 30, 2024 and sell it today you would earn a total of  650.00  from holding John Hancock Financial or generate 19.83% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Cullen Small Cap  vs.  John Hancock Financial

 Performance 
       Timeline  
Cullen Small Cap 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Cullen Small Cap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Cullen Small is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
John Hancock Financial 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in John Hancock Financial are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of very conflicting basic indicators, John Hancock displayed solid returns over the last few months and may actually be approaching a breakup point.

Cullen Small and John Hancock Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cullen Small and John Hancock

The main advantage of trading using opposite Cullen Small and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cullen Small 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 Cullen Small Cap and John Hancock Financial 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.
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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