Correlation Between Western Asset and John Hancock

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

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

Diversification Opportunities for Western Asset and John Hancock

0.53

Correlation Coefficient

Western Asset  John Hancock

Very weak diversification

The 3 months correlation between Western and John is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and John Hancock Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Hancock Income and Western Asset 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 Western Asset Municipal 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 Income has no effect on the direction of Western Asset i.e., Western Asset and John Hancock go up and down completely randomly.

Pair Corralation between Western Asset and John Hancock

Considering the 90-day investment horizon Western Asset Municipal is expected to under-perform the John Hancock. In addition to that, Western Asset is 1.09 times more volatile than John Hancock Income. It trades about -0.05 of its total potential returns per unit of risk. John Hancock Income is currently generating about 0.13 per unit of volatility. If you would invest  1,152  in John Hancock Income on September 12, 2024 and sell it today you would earn a total of  16.00  from holding John Hancock Income or generate 1.39% return on investment over 90 days.

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

Western Asset Municipal  vs.  John Hancock Income

Western Asset Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Municipal has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable technical indicators, Western Asset is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

John Hancock Income

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in John Hancock Income are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Western Asset and John Hancock

The main advantage of trading using opposite Western Asset and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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 Western Asset Municipal and John Hancock 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.