Correlation Between Vanguard Small and John Hancock

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

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

Diversification Opportunities for Vanguard Small and John Hancock

0.97

Correlation Coefficient

Vanguard Small  John Hancock

Almost no diversification

The 3 months correlation between Vanguard and John is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and John Hancock Multifactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Hancock Multifactor and Vanguard Small 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 Vanguard Small Cap Index 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 Multifactor has no effect on the direction of Vanguard Small i.e., Vanguard Small and John Hancock go up and down completely randomly.

Pair Corralation between Vanguard Small and John Hancock

Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to under-perform the John Hancock. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Small Cap Index is 1.05 times less risky than John Hancock. The etf trades about -0.01 of its potential returns per unit of risk. The John Hancock Multifactor is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4,028  in John Hancock Multifactor on October 12, 2024 and sell it today you would lose (37.00) from holding John Hancock Multifactor or give up 0.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Vanguard Small Cap Index  vs.  John Hancock Multifactor

Vanguard Small Cap

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Vanguard Small Cap Index has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Vanguard Small is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

John Hancock Multifactor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days John Hancock Multifactor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, John Hancock is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vanguard Small and John Hancock

The main advantage of trading using opposite Vanguard Small and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Small 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 Vanguard Small Cap Index and John Hancock Multifactor 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.