Correlation Between John Hancock and Vanguard Target

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

Diversification Opportunities for John Hancock and Vanguard Target

0.54

Correlation Coefficient

John Hancock  Vanguard Target

Very weak diversification

The 3 months correlation between John and Vanguard is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Financial and Vanguard Target Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Target Reti 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 Vanguard Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Target Reti has no effect on the direction of John Hancock i.e., John Hancock and Vanguard Target go up and down completely randomly.

Pair Corralation between John Hancock and Vanguard Target

Considering the 90-day investment horizon John Hancock Financial is expected to generate 3.46 times more return on investment than Vanguard Target. However, John Hancock is 3.46 times more volatile than Vanguard Target Retirement. It trades about 0.17 of its potential returns per unit of risk. Vanguard Target Retirement is currently generating about 0.09 per unit of risk. If you would invest  3,233  in John Hancock Financial on September 14, 2024 and sell it today you would earn a total of  529.00  from holding John Hancock Financial or generate 16.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

John Hancock Financial  vs.  Vanguard Target Retirement

John Hancock Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in John Hancock Financial are ranked lower than 13 (%) 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.

Vanguard Target Reti

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Target Retirement are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Vanguard Target 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 Vanguard Target

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

The idea behind John Hancock Financial and Vanguard Target Retirement 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.