Correlation Between Wei Chuan and Johnson Health
Can any of the company-specific risk be diversified away by investing in both Wei Chuan and Johnson Health 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 Wei Chuan and Johnson Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wei Chuan Foods and Johnson Health Tech, you can compare the effects of market volatilities on Wei Chuan and Johnson Health 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 Wei Chuan with a short position of Johnson Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wei Chuan and Johnson Health.
Diversification Opportunities for Wei Chuan and Johnson Health
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Wei and Johnson is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Wei Chuan Foods and Johnson Health Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Health Tech and Wei Chuan 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 Wei Chuan Foods are associated (or correlated) with Johnson Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Health Tech has no effect on the direction of Wei Chuan i.e., Wei Chuan and Johnson Health go up and down completely randomly.
Pair Corralation between Wei Chuan and Johnson Health
Assuming the 90 days trading horizon Wei Chuan Foods is expected to under-perform the Johnson Health. But the stock apears to be less risky and, when comparing its historical volatility, Wei Chuan Foods is 4.4 times less risky than Johnson Health. The stock trades about -0.04 of its potential returns per unit of risk. The Johnson Health Tech is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 6,610 in Johnson Health Tech on September 2, 2024 and sell it today you would earn a total of 9,140 from holding Johnson Health Tech or generate 138.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Wei Chuan Foods vs. Johnson Health Tech
Performance |
| Timeline |
| Wei Chuan Foods |
| Johnson Health Tech |
Wei Chuan and Johnson Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wei Chuan and Johnson Health
The main advantage of trading using opposite Wei Chuan and Johnson Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wei Chuan position performs unexpectedly, Johnson Health 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 Johnson Health will offset losses from the drop in Johnson Health's long position.| Wei Chuan vs. Uni President Enterprises Corp | Wei Chuan vs. Taisun Enterprise Co | Wei Chuan vs. AGV Products Corp | Wei Chuan vs. Great Wall Enterprise |
| Johnson Health vs. Chaintech Technology Corp | Johnson Health vs. Avision | Johnson Health vs. Clevo Co | Johnson Health vs. Elitegroup Computer Systems |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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