Correlation Between John Hancock and Vanguard Momentum

Can any of the company-specific risk be diversified away by investing in both John Hancock and Vanguard Momentum 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 Vanguard Momentum 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 Vanguard Momentum Factor, you can compare the effects of market volatilities on John Hancock and Vanguard Momentum 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 Vanguard Momentum. Check out your portfolio center. Please also check ongoing floating volatility patterns of John Hancock and Vanguard Momentum.

Diversification Opportunities for John Hancock and Vanguard Momentum

0.99

Correlation Coefficient

John Hancock  Vanguard Momentum

No risk reduction

The 3 months correlation between John and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Multifactor and Vanguard Momentum Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Momentum Factor 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 Vanguard Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Momentum Factor has no effect on the direction of John Hancock i.e., John Hancock and Vanguard Momentum go up and down completely randomly.

Pair Corralation between John Hancock and Vanguard Momentum

Given the investment horizon of 90 days John Hancock is expected to generate 1.3 times less return on investment than Vanguard Momentum. But when comparing it to its historical volatility, John Hancock Multifactor is 1.31 times less risky than Vanguard Momentum. It trades about 0.23 of its potential returns per unit of risk. Vanguard Momentum Factor is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  15,266  in Vanguard Momentum Factor on September 3, 2024 and sell it today you would earn a total of  2,447  from holding Vanguard Momentum Factor or generate 16.03% return on investment over 90 days.

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

John Hancock Multifactor  vs.  Vanguard Momentum Factor

John Hancock Multifactor

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in John Hancock Multifactor are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting primary indicators, John Hancock may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard Momentum Factor

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Momentum Factor are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Vanguard Momentum displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with John Hancock and Vanguard Momentum

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

The idea behind John Hancock Multifactor and Vanguard Momentum Factor 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.