Correlation Between Midcap Fund and John Hancock

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

By analyzing existing cross correlation between Midcap Fund R 5 and John Hancock Financial, you can compare the effects of market volatilities on Midcap Fund 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 Midcap Fund with a short position of John Hancock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Midcap Fund and John Hancock.

Diversification Opportunities for Midcap Fund and John Hancock

0.59

Correlation Coefficient

Midcap Fund  John Hancock

Very weak diversification

The 3 months correlation between Midcap and John is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Fund R 5 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 Midcap Fund 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 Midcap Fund R 5 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 Midcap Fund i.e., Midcap Fund and John Hancock go up and down completely randomly.

Pair Corralation between Midcap Fund and John Hancock

Assuming the 90 days horizon Midcap Fund is expected to generate 9.02 times less return on investment than John Hancock. But when comparing it to its historical volatility, Midcap Fund R 5 is 2.08 times less risky than John Hancock. It trades about 0.05 of its potential returns per unit of risk. John Hancock Financial is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  3,431  in John Hancock Financial on August 21, 2024 and sell it today you would earn a total of  343.00  from holding John Hancock Financial or generate 10.0% return on investment over 90 days.

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

Midcap Fund R 5  vs.  John Hancock Financial

Midcap Fund R

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Midcap Fund R 5 are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Midcap Fund may actually be approaching a critical reversion point that can send shares even higher in December 2024.

John Hancock Financial

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in John Hancock Financial are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of very weak basic indicators, John Hancock displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Midcap Fund and John Hancock

The main advantage of trading using opposite Midcap Fund and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Midcap Fund 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 Midcap Fund R 5 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.