Correlation Between Blue Chip and John Hancock

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

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

Diversification Opportunities for Blue Chip and John Hancock

-0.52

Correlation Coefficient

Blue Chip  John Hancock

Excellent diversification

The 3 months correlation between Blue and John is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Blue Chip Growth and John Hancock Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Hancock Income and Blue Chip 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 Blue Chip Growth 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 Income has no effect on the direction of Blue Chip i.e., Blue Chip and John Hancock go up and down completely randomly.

Pair Corralation between Blue Chip and John Hancock

Assuming the 90 days horizon Blue Chip Growth is expected to generate 4.73 times more return on investment than John Hancock. However, Blue Chip is 4.73 times more volatile than John Hancock Income. It trades about 0.4 of its potential returns per unit of risk. John Hancock Income is currently generating about 0.05 per unit of risk. If you would invest  6,078  in Blue Chip Growth on September 18, 2024 and sell it today you would earn a total of  371.00  from holding Blue Chip Growth or generate 6.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Blue Chip Growth  vs.  John Hancock Income

Blue Chip Growth

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Chip Growth are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Blue Chip showed solid returns over the last few months and may actually be approaching a breakup point.

John Hancock Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Blue Chip and John Hancock

The main advantage of trading using opposite Blue Chip and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Chip 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 Blue Chip Growth and John Hancock Income 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.