Correlation Between Connection Technology and Johnson Chemical
Can any of the company-specific risk be diversified away by investing in both Connection Technology and Johnson Chemical 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 Connection Technology and Johnson Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Connection Technology Systems and Johnson Chemical Pharmaceutical, you can compare the effects of market volatilities on Connection Technology and Johnson Chemical 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 Connection Technology with a short position of Johnson Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Connection Technology and Johnson Chemical.
Diversification Opportunities for Connection Technology and Johnson Chemical
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Connection and Johnson is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Connection Technology Systems and Johnson Chemical Pharmaceutica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Chemical Pha and Connection Technology 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 Connection Technology Systems are associated (or correlated) with Johnson Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Chemical Pha has no effect on the direction of Connection Technology i.e., Connection Technology and Johnson Chemical go up and down completely randomly.
Pair Corralation between Connection Technology and Johnson Chemical
Assuming the 90 days trading horizon Connection Technology Systems is expected to generate 0.62 times more return on investment than Johnson Chemical. However, Connection Technology Systems is 1.61 times less risky than Johnson Chemical. It trades about 0.04 of its potential returns per unit of risk. Johnson Chemical Pharmaceutical is currently generating about -0.04 per unit of risk. If you would invest 1,920 in Connection Technology Systems on November 7, 2024 and sell it today you would earn a total of 10.00 from holding Connection Technology Systems or generate 0.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Connection Technology Systems vs. Johnson Chemical Pharmaceutica
Performance |
| Timeline |
| Connection Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Johnson Chemical Pha |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Connection Technology and Johnson Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Connection Technology and Johnson Chemical
The main advantage of trading using opposite Connection Technology and Johnson Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Connection Technology position performs unexpectedly, Johnson Chemical 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 Johnson Chemical will offset losses from the drop in Johnson Chemical's long position.The idea behind Connection Technology Systems and Johnson Chemical Pharmaceutical 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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