Correlation Between John Hancock and Prudential

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

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

Diversification Opportunities for John Hancock and Prudential

0.95

Correlation Coefficient

John Hancock  Prudential

Almost no diversification

The 3 months correlation between John and Prudential is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Variable and Prudential Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Real Estate 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 Variable are associated (or correlated) with Prudential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Real Estate has no effect on the direction of John Hancock i.e., John Hancock and Prudential go up and down completely randomly.

Pair Corralation between John Hancock and Prudential

Assuming the 90 days horizon John Hancock Variable is expected to under-perform the Prudential. But the mutual fund apears to be less risky and, when comparing its historical volatility, John Hancock Variable is 1.02 times less risky than Prudential. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Prudential Real Estate is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,529  in Prudential Real Estate on December 22, 2024 and sell it today you would lose (18.00) from holding Prudential Real Estate or give up 1.18% of portfolio value over 90 days.

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

John Hancock Variable  vs.  Prudential Real Estate

John Hancock Variable

Risk-Adjusted Performance

Very Weak

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

Prudential Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prudential Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Prudential 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 Prudential

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

The idea behind John Hancock Variable and Prudential Real Estate 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.