Correlation Between Morgan Stanley and John Hancock

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

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

Diversification Opportunities for Morgan Stanley and John Hancock

-0.38

Correlation Coefficient

Morgan Stanley  John Hancock

Very good diversification

The 3 months correlation between Morgan and John is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley China 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 Morgan Stanley 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 Morgan Stanley China 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 Morgan Stanley i.e., Morgan Stanley and John Hancock go up and down completely randomly.

Pair Corralation between Morgan Stanley and John Hancock

Considering the 90-day investment horizon Morgan Stanley China is expected to generate 1.83 times more return on investment than John Hancock. However, Morgan Stanley is 1.83 times more volatile than John Hancock Financial. It trades about 0.07 of its potential returns per unit of risk. John Hancock Financial is currently generating about 0.08 per unit of risk. If you would invest  1,122  in Morgan Stanley China on September 22, 2024 and sell it today you would earn a total of  123.00  from holding Morgan Stanley China or generate 10.96% return on investment over 90 days.

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

Morgan Stanley China  vs.  John Hancock Financial

Morgan Stanley China

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley China are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly unsteady basic indicators, Morgan Stanley reported solid returns over the last few months and may actually be approaching a breakup point.

John Hancock Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in John Hancock Financial are ranked lower than 6 (%) 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 January 2025.

Pair Trading with Morgan Stanley and John Hancock

The main advantage of trading using opposite Morgan Stanley and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley 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 Morgan Stanley China 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.