Correlation Between Merck and John Hancock

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

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

Diversification Opportunities for Merck and John Hancock

-0.62

Correlation Coefficient

Merck  John Hancock

Excellent diversification

The 3 months correlation between Merck and John is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and John Hancock Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Hancock Trust and Merck 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 Merck Company 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 Trust has no effect on the direction of Merck i.e., Merck and John Hancock go up and down completely randomly.

Pair Corralation between Merck and John Hancock

Considering the 90-day investment horizon Merck Company is expected to under-perform the John Hancock. But the stock apears to be less risky and, when comparing its historical volatility, Merck Company is 1.02 times less risky than John Hancock. The stock trades about -0.19 of its potential returns per unit of risk. The John Hancock Trust is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  560.00  in John Hancock Trust on September 20, 2024 and sell it today you would lose (5.00) from holding John Hancock Trust or give up 0.89% of portfolio value over 90 days.

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

Merck Company  vs.  John Hancock Trust

Merck Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merck Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

John Hancock Trust

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days John Hancock Trust has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, John Hancock is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Merck and John Hancock

The main advantage of trading using opposite Merck and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck 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 Merck Company and John Hancock Trust 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.