Correlation Between Applied Materials and John Hancock

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

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

Diversification Opportunities for Applied Materials and John Hancock

0.67

Correlation Coefficient

Applied Materials  John Hancock

Poor diversification

The 3 months correlation between Applied and John is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and John Hancock Tax Advantaged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Hancock Tax and Applied Materials 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 Applied Materials 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 Tax has no effect on the direction of Applied Materials i.e., Applied Materials and John Hancock go up and down completely randomly.

Pair Corralation between Applied Materials and John Hancock

Given the investment horizon of 90 days Applied Materials is expected to generate 2.61 times more return on investment than John Hancock. However, Applied Materials is 2.61 times more volatile than John Hancock Tax Advantaged. It trades about -0.02 of its potential returns per unit of risk. John Hancock Tax Advantaged is currently generating about -0.41 per unit of risk. If you would invest  20,623  in Applied Materials on January 28, 2024 and sell it today you would lose (285.00) from holding Applied Materials or give up 1.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	76.19%
Values	Daily Returns

Applied Materials  vs.  John Hancock Tax Advantaged

Applied Materials

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Applied Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

John Hancock Tax

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Applied Materials and John Hancock

The main advantage of trading using opposite Applied Materials and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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 Applied Materials and John Hancock Tax Advantaged 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.