Correlation Between Johnson Health and Formosa Optical
Can any of the company-specific risk be diversified away by investing in both Johnson Health and Formosa Optical 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 Formosa Optical 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 Formosa Optical Technology, you can compare the effects of market volatilities on Johnson Health and Formosa Optical 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 Formosa Optical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Health and Formosa Optical.
Diversification Opportunities for Johnson Health and Formosa Optical
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Johnson and Formosa is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Health Tech and Formosa Optical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formosa Optical Tech 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 Formosa Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formosa Optical Tech has no effect on the direction of Johnson Health i.e., Johnson Health and Formosa Optical go up and down completely randomly.
Pair Corralation between Johnson Health and Formosa Optical
Assuming the 90 days trading horizon Johnson Health Tech is expected to generate 4.67 times more return on investment than Formosa Optical. However, Johnson Health is 4.67 times more volatile than Formosa Optical Technology. It trades about 0.02 of its potential returns per unit of risk. Formosa Optical Technology is currently generating about -0.11 per unit of risk. If you would invest 19,000 in Johnson Health Tech on October 9, 2024 and sell it today you would earn a total of 0.00 from holding Johnson Health Tech or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Health Tech vs. Formosa Optical Technology
Performance |
| Timeline |
| Johnson Health Tech |
| Formosa Optical Tech |
Johnson Health and Formosa Optical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Health and Formosa Optical
The main advantage of trading using opposite Johnson Health and Formosa Optical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Health position performs unexpectedly, Formosa Optical 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 Formosa Optical will offset losses from the drop in Formosa Optical's long position.| Johnson Health vs. Ruentex Development Co | Johnson Health vs. WiseChip Semiconductor | Johnson Health vs. Leader Electronics | Johnson Health vs. CTCI Corp |
| Formosa Optical vs. TWOWAY Communications | Formosa Optical vs. Level Biotechnology | Formosa Optical vs. Chung Lien Transportation | Formosa Optical vs. Chailease Holding Co |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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