Correlation Between Rational Special and Jhancock Short

Can any of the company-specific risk be diversified away by investing in both Rational Special and Jhancock Short 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 Rational Special and Jhancock Short into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rational Special Situations and Jhancock Short Duration, you can compare the effects of market volatilities on Rational Special and Jhancock Short 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 Rational Special with a short position of Jhancock Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Special and Jhancock Short.

Diversification Opportunities for Rational Special and Jhancock Short

0.96

Correlation Coefficient

Rational Special  Jhancock Short

Almost no diversification

The 3 months correlation between Rational and Jhancock is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Rational Special Situations and Jhancock Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jhancock Short Duration and Rational Special 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 Rational Special Situations are associated (or correlated) with Jhancock Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jhancock Short Duration has no effect on the direction of Rational Special i.e., Rational Special and Jhancock Short go up and down completely randomly.

Pair Corralation between Rational Special and Jhancock Short

Assuming the 90 days horizon Rational Special Situations is expected to generate 0.73 times more return on investment than Jhancock Short. However, Rational Special Situations is 1.38 times less risky than Jhancock Short. It trades about 0.13 of its potential returns per unit of risk. Jhancock Short Duration is currently generating about 0.08 per unit of risk. If you would invest  1,782  in Rational Special Situations on January 17, 2025 and sell it today you would earn a total of  14.00  from holding Rational Special Situations or generate 0.79% return on investment over 90 days.

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

Rational Special Situations  vs.  Jhancock Short Duration

Rational Special Sit

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rational Special Situations are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Rational Special is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jhancock Short Duration

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jhancock Short Duration are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Jhancock Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rational Special and Jhancock Short

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

The idea behind Rational Special Situations and Jhancock Short Duration 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..