Correlation Between Johnson Health and Sports Gear
Can any of the company-specific risk be diversified away by investing in both Johnson Health and Sports Gear 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 Sports Gear 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 Sports Gear Co, you can compare the effects of market volatilities on Johnson Health and Sports Gear 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 Sports Gear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Health and Sports Gear.
Diversification Opportunities for Johnson Health and Sports Gear
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Johnson and Sports is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Health Tech and Sports Gear Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sports Gear 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 Sports Gear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sports Gear has no effect on the direction of Johnson Health i.e., Johnson Health and Sports Gear go up and down completely randomly.
Pair Corralation between Johnson Health and Sports Gear
Assuming the 90 days trading horizon Johnson Health Tech is expected to under-perform the Sports Gear. In addition to that, Johnson Health is 1.15 times more volatile than Sports Gear Co. It trades about -0.1 of its total potential returns per unit of risk. Sports Gear Co is currently generating about 0.14 per unit of volatility. If you would invest 12,600 in Sports Gear Co on November 7, 2024 and sell it today you would earn a total of 800.00 from holding Sports Gear Co or generate 6.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Health Tech vs. Sports Gear Co
Performance |
| Timeline |
| Johnson Health Tech |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| Sports Gear |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Johnson Health and Sports Gear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Health and Sports Gear
The main advantage of trading using opposite Johnson Health and Sports Gear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Health position performs unexpectedly, Sports Gear 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 Sports Gear will offset losses from the drop in Sports Gear's long position.The idea behind Johnson Health Tech and Sports Gear 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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