Correlation Between John Hancock and China Fund

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

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

Diversification Opportunities for John Hancock and China Fund

-0.25

Correlation Coefficient

John Hancock  China Fund

Very good diversification

The 3 months correlation between John and China is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Financial and China Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Fund 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 Financial are associated (or correlated) with China Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Fund has no effect on the direction of John Hancock i.e., John Hancock and China Fund go up and down completely randomly.

Pair Corralation between John Hancock and China Fund

Considering the 90-day investment horizon John Hancock Financial is expected to under-perform the China Fund. But the fund apears to be less risky and, when comparing its historical volatility, John Hancock Financial is 1.28 times less risky than China Fund. The fund trades about -0.03 of its potential returns per unit of risk. The China Fund is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,171  in China Fund on December 18, 2024 and sell it today you would earn a total of  230.00  from holding China Fund or generate 19.64% return on investment over 90 days.

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

John Hancock Financial  vs.  China Fund

John Hancock Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days John Hancock Financial has generated negative risk-adjusted returns adding no value to fund investors. 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.

China Fund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of very fragile technical indicators, China Fund displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with John Hancock and China Fund

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

The idea behind John Hancock Financial and China Fund 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.

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 the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.