Correlation Between Johnson Health and Simplo Technology
Can any of the company-specific risk be diversified away by investing in both Johnson Health and Simplo Technology 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 Simplo Technology 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 Simplo Technology Co, you can compare the effects of market volatilities on Johnson Health and Simplo Technology 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 Simplo Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Health and Simplo Technology.
Diversification Opportunities for Johnson Health and Simplo Technology
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Johnson and Simplo is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Health Tech and Simplo Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplo Technology 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 Simplo Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplo Technology has no effect on the direction of Johnson Health i.e., Johnson Health and Simplo Technology go up and down completely randomly.
Pair Corralation between Johnson Health and Simplo Technology
Assuming the 90 days trading horizon Johnson Health Tech is expected to generate 1.78 times more return on investment than Simplo Technology. However, Johnson Health is 1.78 times more volatile than Simplo Technology Co. It trades about 0.16 of its potential returns per unit of risk. Simplo Technology Co 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Health Tech vs. Simplo Technology Co
Performance |
| Timeline |
| Johnson Health Tech |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Simplo Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Johnson Health and Simplo Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Health and Simplo Technology
The main advantage of trading using opposite Johnson Health and Simplo Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Health position performs unexpectedly, Simplo Technology 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 Simplo Technology will offset losses from the drop in Simplo Technology's long position.The idea behind Johnson Health Tech and Simplo Technology Co 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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