Can any of the company-specific risk be diversified away by investing in both TechnipFMC PLC 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 TechnipFMC PLC and John Hancock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TechnipFMC PLC and John Hancock Disciplined, you can compare the effects of market volatilities on TechnipFMC PLC 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 TechnipFMC PLC with a short position of John Hancock. Check out your portfolio center. Please also check ongoing floating volatility patterns of TechnipFMC PLC and John Hancock.
Diversification Opportunities for TechnipFMC PLC and John Hancock
The 3 months correlation between TechnipFMC and John is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding TechnipFMC PLC and John Hancock Disciplined in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Hancock Disciplined and TechnipFMC PLC 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 TechnipFMC PLC 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 Disciplined has no effect on the direction of TechnipFMC PLC i.e., TechnipFMC PLC and John Hancock go up and down completely randomly.
Pair Corralation between TechnipFMC PLC and John Hancock
Considering the 90-day investment horizon TechnipFMC PLC is expected to generate 2.45 times more return on investment than John Hancock. However, TechnipFMC PLC is 2.45 times more volatile than John Hancock Disciplined. It trades about 0.11 of its potential returns per unit of risk. John Hancock Disciplined is currently generating about 0.06 per unit of risk. If you would invest 682.00 in TechnipFMC PLC on March 6, 2024 and sell it today you would earn a total of 1,722 from holding TechnipFMC PLC or generate 252.42% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in TechnipFMC PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, TechnipFMC PLC demonstrated solid returns over the last few months and may actually be approaching a breakup point.
Over the last 90 days John Hancock Disciplined has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, John Hancock is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.