Correlation Between Western Asset and John Hancock

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

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

Diversification Opportunities for Western Asset and John Hancock

0.6

Correlation Coefficient

Western Asset  John Hancock

Poor diversification

The 3 months correlation between Western and John is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and John Hancock Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Hancock Hedged and Western Asset 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 Western Asset High 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 Hedged has no effect on the direction of Western Asset i.e., Western Asset and John Hancock go up and down completely randomly.

Pair Corralation between Western Asset and John Hancock

Considering the 90-day investment horizon Western Asset High is expected to generate 0.82 times more return on investment than John Hancock. However, Western Asset High is 1.23 times less risky than John Hancock. It trades about 0.16 of its potential returns per unit of risk. John Hancock Hedged is currently generating about 0.08 per unit of risk. If you would invest  383.00  in Western Asset High on December 27, 2024 and sell it today you would earn a total of  20.00  from holding Western Asset High or generate 5.22% return on investment over 90 days.

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

Western Asset High  vs.  John Hancock Hedged

Western Asset High

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset High are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy forward indicators, Western Asset is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

John Hancock Hedged

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in John Hancock Hedged are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, John Hancock is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Western Asset and John Hancock

The main advantage of trading using opposite Western Asset and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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 Western Asset High and John Hancock Hedged 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.