Correlation Between John Hancock and First Trust

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

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

Diversification Opportunities for John Hancock and First Trust

0.92

Correlation Coefficient

John Hancock  First Trust

Almost no diversification

The 3 months correlation between John and First is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Multifactor and First Trust Dorsey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dorsey 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 Multifactor are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Dorsey has no effect on the direction of John Hancock i.e., John Hancock and First Trust go up and down completely randomly.

Pair Corralation between John Hancock and First Trust

Given the investment horizon of 90 days John Hancock Multifactor is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, John Hancock Multifactor is 1.34 times less risky than First Trust. The etf trades about -0.28 of its potential returns per unit of risk. The First Trust Dorsey is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  6,112  in First Trust Dorsey on September 23, 2024 and sell it today you would lose (120.00) from holding First Trust Dorsey or give up 1.96% 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 Multifactor  vs.  First Trust Dorsey

John Hancock Multifactor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in John Hancock Multifactor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, John Hancock is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

First Trust Dorsey

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Dorsey are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, First Trust is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with John Hancock and First Trust

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

The idea behind John Hancock Multifactor and First Trust Dorsey 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.