Correlation Between John Hancock and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both John Hancock and Wells Fargo 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 Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between John Hancock Financial and Wells Fargo Short Term, you can compare the effects of market volatilities on John Hancock and Wells Fargo 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 Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of John Hancock and Wells Fargo.
Diversification Opportunities for John Hancock and Wells Fargo
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between John and Wells is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding John Hancock Financial and Wells Fargo Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Short 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 Financial are associated (or correlated) with Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo Short has no effect on the direction of John Hancock i.e., John Hancock and Wells Fargo go up and down completely randomly.
Pair Corralation between John Hancock and Wells Fargo
Considering the 90-day investment horizon John Hancock Financial is expected to generate 13.21 times more return on investment than Wells Fargo. However, John Hancock is 13.21 times more volatile than Wells Fargo Short Term. It trades about 0.03 of its potential returns per unit of risk. Wells Fargo Short Term is currently generating about 0.15 per unit of risk. If you would invest 2,990 in John Hancock Financial on November 2, 2024 and sell it today you would earn a total of 778.00 from holding John Hancock Financial or generate 26.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
John Hancock Financial vs. Wells Fargo Short Term
Performance |
| Timeline |
| John Hancock Financial |
| Wells Fargo Short |
John Hancock and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with John Hancock and Wells Fargo
The main advantage of trading using opposite John Hancock and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if John Hancock position performs unexpectedly, Wells Fargo 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 Wells Fargo will offset losses from the drop in Wells Fargo's long position.| John Hancock vs. Tekla Life Sciences | John Hancock vs. Tekla World Healthcare | John Hancock vs. Tekla Healthcare Opportunities | John Hancock vs. Royce Value Closed |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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