Correlation Between John Hancock and DOW

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

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

Diversification Opportunities for John Hancock and DOW

0.43
  Correlation Coefficient
John Hancock Disciplined
DOW

Very weak diversification

The 3 months correlation between JDITX and DOW is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Disciplined and DOW in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on DOW 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 Disciplined are associated (or correlated) with DOW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOW has no effect on the direction of John Hancock i.e., John Hancock and DOW go up and down completely randomly.
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Pair Corralation between John Hancock and DOW

Assuming the 90 days horizon John Hancock Disciplined is expected to under-perform the DOW. But the mutual fund apears to be less risky and, when comparing its historical volatility, John Hancock Disciplined is 1.02 times less risky than DOW. The mutual fund trades about 0.0 of its potential returns per unit of risk. The DOW is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,475,132  in DOW on July 18, 2021 and sell it today you would earn a total of  54,344  from holding DOW or generate 1.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.65%
ValuesDaily Returns

John Hancock Disciplined  vs.  DOW

 Performance (%) 
      Timeline 

John Hancock and DOW Volatility Contrast

 Predicted Return Density 
      Returns 

DOW

Pair trading matchups for DOW

General Mills vs. DOW
High Dividend vs. DOW
Vmware vs. DOW
Salesforce vs. DOW
Facebook vs. DOW
Microsoft Corp vs. DOW
Square vs. DOW
GM vs. DOW
Flowers Foods vs. DOW
Visa vs. DOW
Walker Dunlop vs. DOW
Sentinelone Inc vs. DOW
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW.

Pair Trading with John Hancock and DOW

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

DOW

Pair trading matchups for DOW

Vmware vs. DOW
GM vs. DOW
Visa vs. DOW
Walker Dunlop vs. DOW
Facebook vs. DOW
Main Street vs. DOW
Salesforce vs. DOW
Upstart Holdings vs. DOW
Microsoft Corp vs. DOW
Citigroup vs. DOW
Flowers Foods vs. DOW
General Mills vs. DOW
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW.
Check out your portfolio center. 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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