Correlation Between Vanguard Financials and John Hancock

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

Diversification Opportunities for Vanguard Financials and John Hancock

0.63

Correlation Coefficient

Vanguard Financials  John Hancock

Poor diversification

The 3 months correlation between Vanguard and John is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Financials Index and John Hancock Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Hancock Financial and Vanguard Financials 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 Financials Index 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 Financial has no effect on the direction of Vanguard Financials i.e., Vanguard Financials and John Hancock go up and down completely randomly.

Pair Corralation between Vanguard Financials and John Hancock

Assuming the 90 days horizon Vanguard Financials is expected to generate 1.06 times less return on investment than John Hancock. But when comparing it to its historical volatility, Vanguard Financials Index is 1.47 times less risky than John Hancock. It trades about 0.23 of its potential returns per unit of risk. John Hancock Financial is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,772  in John Hancock Financial on February 21, 2024 and sell it today you would earn a total of  86.00  from holding John Hancock Financial or generate 3.1% return on investment over 90 days.

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

Vanguard Financials Index  vs.  John Hancock Financial

Vanguard Financials Index

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Financials Index are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Vanguard Financials may actually be approaching a critical reversion point that can send shares even higher in June 2024.

John Hancock Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in John Hancock Financial are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, John Hancock is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Financials and John Hancock

The main advantage of trading using opposite Vanguard Financials and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Financials 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 Financials Index and John Hancock Financial 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.