Correlation Between John Hancock and Federated Hermes

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

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

Diversification Opportunities for John Hancock and Federated Hermes

0.09

Correlation Coefficient

John Hancock  Federated Hermes

Significant diversification

The 3 months correlation between John and Federated is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Government and Federated Hermes Conservative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Hermes Con 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 Government are associated (or correlated) with Federated Hermes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Hermes Con has no effect on the direction of John Hancock i.e., John Hancock and Federated Hermes go up and down completely randomly.

Pair Corralation between John Hancock and Federated Hermes

Assuming the 90 days horizon John Hancock Government is expected to generate 2.83 times more return on investment than Federated Hermes. However, John Hancock is 2.83 times more volatile than Federated Hermes Conservative. It trades about 0.16 of its potential returns per unit of risk. Federated Hermes Conservative is currently generating about 0.23 per unit of risk. If you would invest  766.00  in John Hancock Government on December 28, 2024 and sell it today you would earn a total of  16.00  from holding John Hancock Government or generate 2.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	78.33%
Values	Daily Returns

John Hancock Government  vs.  Federated Hermes Conservative

John Hancock Government

Risk-Adjusted Performance

Good

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

Federated Hermes Con

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Hermes Conservative are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Federated Hermes 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 Federated Hermes

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

The idea behind John Hancock Government and Federated Hermes Conservative 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.