Correlation Between Prudential Total and John Hancock

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

By analyzing existing cross correlation between Prudential Total Return and John Hancock Bond, you can compare the effects of market volatilities on Prudential Total and John Hancock 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 Prudential Total with a short position of John Hancock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Total and John Hancock.

Diversification Opportunities for Prudential Total and John Hancock

0.96

Correlation Coefficient

Prudential Total  John Hancock

Almost no diversification

The 3 months correlation between Prudential and John is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Total Return and John Hancock Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Hancock Bond and Prudential Total 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 Prudential Total Return are associated (or correlated) with John Hancock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of John Hancock Bond has no effect on the direction of Prudential Total i.e., Prudential Total and John Hancock go up and down completely randomly.

Pair Corralation between Prudential Total and John Hancock

Assuming the 90 days horizon Prudential Total Return is expected to generate 0.93 times more return on investment than John Hancock. However, Prudential Total Return is 1.08 times less risky than John Hancock. It trades about -0.14 of its potential returns per unit of risk. John Hancock Bond is currently generating about -0.14 per unit of risk. If you would invest  1,224  in Prudential Total Return on September 18, 2024 and sell it today you would lose (31.00) from holding Prudential Total Return or give up 2.53% of portfolio value over 90 days.

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

Prudential Total Return  vs.  John Hancock Bond

Prudential Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

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

John Hancock Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Prudential Total and John Hancock

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

The idea behind Prudential Total Return and John Hancock Bond 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.