Correlation Between John Hancock and Pace Large

Can any of the company-specific risk be diversified away by investing in both John Hancock and Pace Large 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 Pace Large 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 Pace Large Value, you can compare the effects of market volatilities on John Hancock and Pace Large 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 Pace Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of John Hancock and Pace Large.

Diversification Opportunities for John Hancock and Pace Large

0.93

Correlation Coefficient

John Hancock  Pace Large

Almost no diversification

The 3 months correlation between John and Pace is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Financial and Pace Large Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Large Value 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 Pace Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Large Value has no effect on the direction of John Hancock i.e., John Hancock and Pace Large go up and down completely randomly.

Pair Corralation between John Hancock and Pace Large

Considering the 90-day investment horizon John Hancock Financial is expected to under-perform the Pace Large. In addition to that, John Hancock is 2.09 times more volatile than Pace Large Value. It trades about -0.03 of its total potential returns per unit of risk. Pace Large Value is currently generating about -0.02 per unit of volatility. If you would invest  2,289  in Pace Large Value on September 17, 2024 and sell it today you would lose (4.00) from holding Pace Large Value or give up 0.17% of portfolio value over 90 days.

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

John Hancock Financial  vs.  Pace Large Value

John Hancock Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in John Hancock Financial are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of very unsteady basic indicators, John Hancock displayed solid returns over the last few months and may actually be approaching a breakup point.

Pace Large Value

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pace Large Value are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pace Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with John Hancock and Pace Large

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

The idea behind John Hancock Financial and Pace Large Value 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 Global Correlations module to find global opportunities by holding instruments from different markets.