Correlation Between John Hancock and DWS Municipal

Can any of the company-specific risk be diversified away by investing in both John Hancock and DWS Municipal 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 DWS Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between John Hancock Income and DWS Municipal Income, you can compare the effects of market volatilities on John Hancock and DWS Municipal 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 DWS Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of John Hancock and DWS Municipal.

Diversification Opportunities for John Hancock and DWS Municipal

-0.01

Correlation Coefficient

John Hancock  DWS Municipal

Good diversification

The 3 months correlation between John and DWS is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Income and DWS Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DWS Municipal Income 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 Income are associated (or correlated) with DWS Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DWS Municipal Income has no effect on the direction of John Hancock i.e., John Hancock and DWS Municipal go up and down completely randomly.

Pair Corralation between John Hancock and DWS Municipal

Considering the 90-day investment horizon John Hancock is expected to generate 1.71 times less return on investment than DWS Municipal. But when comparing it to its historical volatility, John Hancock Income is 1.13 times less risky than DWS Municipal. It trades about 0.09 of its potential returns per unit of risk. DWS Municipal Income is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  813.00  in DWS Municipal Income on September 4, 2024 and sell it today you would earn a total of  191.00  from holding DWS Municipal Income or generate 23.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

John Hancock Income  vs.  DWS Municipal Income

John Hancock Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days John Hancock Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, John Hancock is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

DWS Municipal Income

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DWS Municipal Income are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, DWS Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with John Hancock and DWS Municipal

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

The idea behind John Hancock Income and DWS Municipal Income 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.