Correlation Between John Hancock and Invesco Small

Can any of the company-specific risk be diversified away by investing in both John Hancock and Invesco Small 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 Invesco Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between John Hancock Financial and Invesco Small Cap, you can compare the effects of market volatilities on John Hancock and Invesco Small 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 Invesco Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of John Hancock and Invesco Small.

Diversification Opportunities for John Hancock and Invesco Small

0.41

Correlation Coefficient

John Hancock  Invesco Small

Very weak diversification

The 3 months correlation between John and Invesco is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Financial and Invesco Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Small Cap 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 Financial are associated (or correlated) with Invesco Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Small Cap has no effect on the direction of John Hancock i.e., John Hancock and Invesco Small go up and down completely randomly.

Pair Corralation between John Hancock and Invesco Small

Considering the 90-day investment horizon John Hancock is expected to generate 5.0 times less return on investment than Invesco Small. In addition to that, John Hancock is 1.34 times more volatile than Invesco Small Cap. It trades about 0.04 of its total potential returns per unit of risk. Invesco Small Cap is currently generating about 0.25 per unit of volatility. If you would invest  2,024  in Invesco Small Cap on February 19, 2024 and sell it today you would earn a total of  322.00  from holding Invesco Small Cap or generate 15.91% return on investment over 90 days.

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

John Hancock Financial  vs.  Invesco Small Cap

John Hancock Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in John Hancock Financial are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, John Hancock is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Invesco Small Cap

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Small Cap are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Invesco Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with John Hancock and Invesco Small

The main advantage of trading using opposite John Hancock and Invesco Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if John Hancock position performs unexpectedly, Invesco Small 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 Invesco Small will offset losses from the drop in Invesco Small's long position.

The idea behind John Hancock Financial and Invesco Small Cap 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.