Correlation Between Prudential Financial and John Hancock

Can any of the company-specific risk be diversified away by investing in both Prudential Financial 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 Financial 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 Financial Services and John Hancock Financial, you can compare the effects of market volatilities on Prudential Financial 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 Financial with a short position of John Hancock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and John Hancock.

Diversification Opportunities for Prudential Financial and John Hancock

0.81

Correlation Coefficient

Prudential Financial  John Hancock

Very poor diversification

The 3 months correlation between Prudential and John is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial Services and John Hancock Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Hancock Financial and Prudential Financial 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 Financial Services 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 Financial has no effect on the direction of Prudential Financial i.e., Prudential Financial and John Hancock go up and down completely randomly.

Pair Corralation between Prudential Financial and John Hancock

Assuming the 90 days horizon Prudential Financial Services is expected to under-perform the John Hancock. But the mutual fund apears to be less risky and, when comparing its historical volatility, Prudential Financial Services is 1.05 times less risky than John Hancock. The mutual fund trades about -0.33 of its potential returns per unit of risk. The John Hancock Financial is currently generating about -0.28 of returns per unit of risk over similar time horizon. If you would invest  3,838  in John Hancock Financial on October 10, 2024 and sell it today you would lose (335.00) from holding John Hancock Financial or give up 8.73% of portfolio value over 90 days.

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

Prudential Financial Services  vs.  John Hancock Financial

Prudential Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

John Hancock Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in John Hancock Financial are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of very conflicting basic indicators, John Hancock may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Prudential Financial and John Hancock

The main advantage of trading using opposite Prudential Financial and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Financial 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 Financial Services and John Hancock Financial 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.