Correlation Between Johnson Health and Chi Hua
Can any of the company-specific risk be diversified away by investing in both Johnson Health and Chi Hua 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 Johnson Health and Chi Hua into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Health Tech and Chi Hua Fitness, you can compare the effects of market volatilities on Johnson Health and Chi Hua 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 Johnson Health with a short position of Chi Hua. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Health and Chi Hua.
Diversification Opportunities for Johnson Health and Chi Hua
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Johnson and Chi is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Health Tech and Chi Hua Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chi Hua Fitness and Johnson Health 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 Johnson Health Tech are associated (or correlated) with Chi Hua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chi Hua Fitness has no effect on the direction of Johnson Health i.e., Johnson Health and Chi Hua go up and down completely randomly.
Pair Corralation between Johnson Health and Chi Hua
Assuming the 90 days trading horizon Johnson Health Tech is expected to generate 3.04 times more return on investment than Chi Hua. However, Johnson Health is 3.04 times more volatile than Chi Hua Fitness. It trades about 0.16 of its potential returns per unit of risk. Chi Hua Fitness is currently generating about -0.09 per unit of risk. If you would invest 10,100 in Johnson Health Tech on November 3, 2024 and sell it today you would earn a total of 8,850 from holding Johnson Health Tech or generate 87.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Health Tech vs. Chi Hua Fitness
Performance |
| Timeline |
| Johnson Health Tech |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Chi Hua Fitness |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Johnson Health and Chi Hua Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Health and Chi Hua
The main advantage of trading using opposite Johnson Health and Chi Hua positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Health position performs unexpectedly, Chi Hua 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 Chi Hua will offset losses from the drop in Chi Hua's long position.The idea behind Johnson Health Tech and Chi Hua Fitness 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.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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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