Correlation Between Vanguard Extended and John Hancock

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

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

Diversification Opportunities for Vanguard Extended and John Hancock

0.96

Correlation Coefficient

Vanguard Extended  John Hancock

Almost no diversification

The 3 months correlation between Vanguard and John is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Extended Market and John Hancock Multifactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Hancock Multifactor and Vanguard Extended 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 Vanguard Extended Market 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 Multifactor has no effect on the direction of Vanguard Extended i.e., Vanguard Extended and John Hancock go up and down completely randomly.

Pair Corralation between Vanguard Extended and John Hancock

Considering the 90-day investment horizon Vanguard Extended Market is expected to generate 1.34 times more return on investment than John Hancock. However, Vanguard Extended is 1.34 times more volatile than John Hancock Multifactor. It trades about 0.09 of its potential returns per unit of risk. John Hancock Multifactor is currently generating about 0.03 per unit of risk. If you would invest  18,131  in Vanguard Extended Market on September 22, 2024 and sell it today you would earn a total of  1,163  from holding Vanguard Extended Market or generate 6.41% return on investment over 90 days.

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

Vanguard Extended Market  vs.  John Hancock Multifactor

Vanguard Extended Market

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Extended Market are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Vanguard Extended may actually be approaching a critical reversion point that can send shares even higher in January 2025.

John Hancock Multifactor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in John Hancock Multifactor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, John Hancock is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Extended and John Hancock

The main advantage of trading using opposite Vanguard Extended and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Extended 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 Vanguard Extended Market and John Hancock Multifactor 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.