Correlation Between John Hancock and Wells Fargo

Can any of the company-specific risk be diversified away by investing in both John Hancock and Wells Fargo 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 Wells Fargo 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 Wells Fargo Emerging, you can compare the effects of market volatilities on John Hancock and Wells Fargo 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 Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of John Hancock and Wells Fargo.

Diversification Opportunities for John Hancock and Wells Fargo

0.07

Correlation Coefficient

John Hancock  Wells Fargo

Significant diversification

The 3 months correlation between John and Wells is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Financial and Wells Fargo Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Emerging 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 Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo Emerging has no effect on the direction of John Hancock i.e., John Hancock and Wells Fargo go up and down completely randomly.

Pair Corralation between John Hancock and Wells Fargo

Considering the 90-day investment horizon John Hancock Financial is expected to generate 2.4 times more return on investment than Wells Fargo. However, John Hancock is 2.4 times more volatile than Wells Fargo Emerging. It trades about 0.1 of its potential returns per unit of risk. Wells Fargo Emerging is currently generating about -0.09 per unit of risk. If you would invest  3,352  in John Hancock Financial on October 27, 2024 and sell it today you would earn a total of  342.00  from holding John Hancock Financial or generate 10.2% return on investment over 90 days.

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

John Hancock Financial  vs.  Wells Fargo Emerging

John Hancock Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in John Hancock Financial are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of very conflicting basic indicators, John Hancock may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Wells Fargo Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wells Fargo Emerging has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Wells Fargo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with John Hancock and Wells Fargo

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

The idea behind John Hancock Financial and Wells Fargo Emerging 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .