Correlation Between Johnson Health and MedFirst Healthcare
Can any of the company-specific risk be diversified away by investing in both Johnson Health and MedFirst Healthcare 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 MedFirst Healthcare 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 MedFirst Healthcare Services, you can compare the effects of market volatilities on Johnson Health and MedFirst Healthcare 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 MedFirst Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Health and MedFirst Healthcare.
Diversification Opportunities for Johnson Health and MedFirst Healthcare
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Johnson and MedFirst is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Health Tech and MedFirst Healthcare Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MedFirst Healthcare 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 MedFirst Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MedFirst Healthcare has no effect on the direction of Johnson Health i.e., Johnson Health and MedFirst Healthcare go up and down completely randomly.
Pair Corralation between Johnson Health and MedFirst Healthcare
Assuming the 90 days trading horizon Johnson Health Tech is expected to generate 5.62 times more return on investment than MedFirst Healthcare. However, Johnson Health is 5.62 times more volatile than MedFirst Healthcare Services. It trades about 0.16 of its potential returns per unit of risk. MedFirst Healthcare Services is currently generating about -0.07 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Health Tech vs. MedFirst Healthcare Services
Performance |
| Timeline |
| Johnson Health Tech |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| MedFirst Healthcare |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Johnson Health and MedFirst Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Health and MedFirst Healthcare
The main advantage of trading using opposite Johnson Health and MedFirst Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Health position performs unexpectedly, MedFirst Healthcare 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 MedFirst Healthcare will offset losses from the drop in MedFirst Healthcare's long position.The idea behind Johnson Health Tech and MedFirst Healthcare Services 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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