Correlation Between John Hancock and DTF Tax

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

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

Diversification Opportunities for John Hancock and DTF Tax

0.05

Correlation Coefficient

John Hancock  DTF Tax

Significant diversification

The 3 months correlation between John and DTF is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Income and DTF Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTF Tax Free 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 Income are associated (or correlated) with DTF Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DTF Tax Free has no effect on the direction of John Hancock i.e., John Hancock and DTF Tax go up and down completely randomly.

Pair Corralation between John Hancock and DTF Tax

Considering the 90-day investment horizon John Hancock is expected to generate 3.33 times less return on investment than DTF Tax. But when comparing it to its historical volatility, John Hancock Income is 1.02 times less risky than DTF Tax. It trades about 0.02 of its potential returns per unit of risk. DTF Tax Free is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,117  in DTF Tax Free on November 28, 2024 and sell it today you would earn a total of  18.00  from holding DTF Tax Free or generate 1.61% return on investment over 90 days.

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

John Hancock Income  vs.  DTF Tax Free

John Hancock Income

Risk-Adjusted Performance

Very Weak

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

DTF Tax Free

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DTF Tax Free are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, DTF Tax is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with John Hancock and DTF Tax

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

The idea behind John Hancock Income and DTF Tax Free 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.