Correlation Between John Hancock and Schwab Large

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

Diversification Opportunities for John Hancock and Schwab Large

0.91

Correlation Coefficient

John Hancock  Schwab Large

Almost no diversification

The 3 months correlation between John and Schwab is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Financial and Schwab Large Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Large Cap 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 Schwab Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Large Cap has no effect on the direction of John Hancock i.e., John Hancock and Schwab Large go up and down completely randomly.

Pair Corralation between John Hancock and Schwab Large

Considering the 90-day investment horizon John Hancock Financial is expected to generate 2.2 times more return on investment than Schwab Large. However, John Hancock is 2.2 times more volatile than Schwab Large Cap Value. It trades about 0.1 of its potential returns per unit of risk. Schwab Large Cap Value is currently generating about 0.1 per unit of risk. If you would invest  2,436  in John Hancock Financial on September 12, 2024 and sell it today you would earn a total of  1,456  from holding John Hancock Financial or generate 59.77% return on investment over 90 days.

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

John Hancock Financial  vs.  Schwab Large Cap Value

John Hancock Financial

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in John Hancock Financial are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of very conflicting basic indicators, John Hancock displayed solid returns over the last few months and may actually be approaching a breakup point.

Schwab Large Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Large Cap Value are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Schwab Large 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 Schwab Large

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

The idea behind John Hancock Financial and Schwab Large Cap Value 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.