Correlation Between Aqr Small and John Hancock

Can any of the company-specific risk be diversified away by investing in both Aqr 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 Aqr 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 Aqr Small Cap and John Hancock Strategic, you can compare the effects of market volatilities on Aqr 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 Aqr Small with a short position of John Hancock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Small and John Hancock.

Diversification Opportunities for Aqr Small and John Hancock

0.88

Correlation Coefficient

Aqr Small  John Hancock

Very poor diversification

The 3 months correlation between Aqr and John is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Small Cap and John Hancock Strategic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Hancock Strategic and Aqr 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 Aqr 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 Strategic has no effect on the direction of Aqr Small i.e., Aqr Small and John Hancock go up and down completely randomly.

Pair Corralation between Aqr Small and John Hancock

Assuming the 90 days horizon Aqr Small is expected to generate 1.52 times less return on investment than John Hancock. In addition to that, Aqr Small is 1.28 times more volatile than John Hancock Strategic. It trades about 0.06 of its total potential returns per unit of risk. John Hancock Strategic is currently generating about 0.12 per unit of volatility. If you would invest  2,213  in John Hancock Strategic on September 14, 2024 and sell it today you would earn a total of  775.00  from holding John Hancock Strategic or generate 35.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Aqr Small Cap  vs.  John Hancock Strategic

Aqr Small Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Small Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aqr Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

John Hancock Strategic

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in John Hancock Strategic are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, John Hancock may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aqr Small and John Hancock

The main advantage of trading using opposite Aqr Small and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr 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 Aqr Small Cap and John Hancock Strategic 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.