Correlation Between John Hancock and State Farm

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

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

Diversification Opportunities for John Hancock and State Farm

0.41

Correlation Coefficient

John Hancock  State Farm

Very weak diversification

The 3 months correlation between John and State is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Disciplined and State Farm Interim in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Farm Interim 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 Disciplined are associated (or correlated) with State Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Farm Interim has no effect on the direction of John Hancock i.e., John Hancock and State Farm go up and down completely randomly.

Pair Corralation between John Hancock and State Farm

Assuming the 90 days horizon John Hancock Disciplined is expected to under-perform the State Farm. In addition to that, John Hancock is 8.13 times more volatile than State Farm Interim. It trades about -0.04 of its total potential returns per unit of risk. State Farm Interim is currently generating about 0.07 per unit of volatility. If you would invest  942.00  in State Farm Interim on October 7, 2024 and sell it today you would earn a total of  14.00  from holding State Farm Interim or generate 1.49% return on investment over 90 days.

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

John Hancock Disciplined  vs.  State Farm Interim

John Hancock Disciplined

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days John Hancock Disciplined has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

State Farm Interim

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days State Farm Interim has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, State Farm 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 State Farm

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

The idea behind John Hancock Disciplined and State Farm Interim 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.