Correlation Between State Street and John Hancock

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

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

Diversification Opportunities for State Street and John Hancock

0.36

Correlation Coefficient

State Street  John Hancock

Weak diversification

The 3 months correlation between State and John is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding State Street Target 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 State Street 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 State Street Target 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 State Street i.e., State Street and John Hancock go up and down completely randomly.

Pair Corralation between State Street and John Hancock

Assuming the 90 days horizon State Street is expected to generate 3.03 times less return on investment than John Hancock. But when comparing it to its historical volatility, State Street Target is 5.17 times less risky than John Hancock. It trades about 0.08 of its potential returns per unit of risk. John Hancock Financial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,464  in John Hancock Financial on December 4, 2024 and sell it today you would earn a total of  1,035  from holding John Hancock Financial or generate 42.0% return on investment over 90 days.

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

State Street Target  vs.  John Hancock Financial

State Street Target

Risk-Adjusted Performance

Very Weak

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

Very Weak

Over the last 90 days John Hancock Financial has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest conflicting performance, the Fund's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the fund investors.

Pair Trading with State Street and John Hancock

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

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.