Correlation Between Mid Cap and John Hancock
Can any of the company-specific risk be diversified away by investing in both Mid Cap 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 Mid Cap and John Hancock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Cap Value and John Hancock Disciplined, you can compare the effects of market volatilities on Mid Cap 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 Mid Cap with a short position of John Hancock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and John Hancock.
Diversification Opportunities for Mid Cap and John Hancock
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Mid and John is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value 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 Mid Cap 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 Mid Cap Value 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 Mid Cap i.e., Mid Cap and John Hancock go up and down completely randomly.
Pair Corralation between Mid Cap and John Hancock
Assuming the 90 days horizon Mid Cap is expected to generate 1.76 times less return on investment than John Hancock. But when comparing it to its historical volatility, Mid Cap Value is 1.06 times less risky than John Hancock. It trades about 0.06 of its potential returns per unit of risk. John Hancock Disciplined is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,582 in John Hancock Disciplined on January 26, 2024 and sell it today you would earn a total of 124.00 from holding John Hancock Disciplined or generate 4.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap Value vs. John Hancock Disciplined
Performance |
| Timeline |
| Mid Cap Value |
| John Hancock Disciplined |
Mid Cap and John Hancock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and John Hancock
The main advantage of trading using opposite Mid Cap and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap 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 Mid Cap Value and John Hancock Disciplined 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.| John Hancock vs. Fidelity Low Priced Stock | John Hancock vs. Vanguard Mid Cap Value | John Hancock vs. Jpmorgan Mid Cap |
Check out your portfolio center.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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