Correlation Between First Trust and John Hancock
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and John Hancock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Specialty and John Hancock Financial, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of John Hancock. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and John Hancock.
Diversification Opportunities for First Trust and John Hancock
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and John is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Specialty 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 First Trust 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 First Trust Specialty 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 First Trust i.e., First Trust and John Hancock go up and down completely randomly.
Pair Corralation between First Trust and John Hancock
Considering the 90-day investment horizon First Trust is expected to generate 2.24 times less return on investment than John Hancock. But when comparing it to its historical volatility, First Trust Specialty is 3.0 times less risky than John Hancock. It trades about 0.47 of its potential returns per unit of risk. John Hancock Financial is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 3,415 in John Hancock Financial on September 1, 2024 and sell it today you would earn a total of 525.00 from holding John Hancock Financial or generate 15.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Specialty vs. John Hancock Financial
Performance |
| Timeline |
| First Trust Specialty |
| John Hancock Financial |
First Trust and John Hancock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and John Hancock
The main advantage of trading using opposite First Trust and John Hancock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. MFS High Income | First Trust vs. MFS High Yield | First Trust vs. Blackrock Muniholdings Quality | First Trust vs. MFS Government Markets |
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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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