Correlation Between Johnson Chemical and CHO Pharma
Can any of the company-specific risk be diversified away by investing in both Johnson Chemical and CHO Pharma 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 Chemical and CHO Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Chemical Pharmaceutical and CHO Pharma, you can compare the effects of market volatilities on Johnson Chemical and CHO Pharma 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 Chemical with a short position of CHO Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Chemical and CHO Pharma.
Diversification Opportunities for Johnson Chemical and CHO Pharma
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Johnson and CHO is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Chemical Pharmaceutica and CHO Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHO Pharma and Johnson Chemical 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 Chemical Pharmaceutical are associated (or correlated) with CHO Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHO Pharma has no effect on the direction of Johnson Chemical i.e., Johnson Chemical and CHO Pharma go up and down completely randomly.
Pair Corralation between Johnson Chemical and CHO Pharma
Assuming the 90 days trading horizon Johnson Chemical Pharmaceutical is expected to generate 1.1 times more return on investment than CHO Pharma. However, Johnson Chemical is 1.1 times more volatile than CHO Pharma. It trades about -0.05 of its potential returns per unit of risk. CHO Pharma is currently generating about -0.11 per unit of risk. If you would invest 7,170 in Johnson Chemical Pharmaceutical on October 25, 2024 and sell it today you would lose (140.00) from holding Johnson Chemical Pharmaceutical or give up 1.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Johnson Chemical Pharmaceutica vs. CHO Pharma
Performance |
| Timeline |
| Johnson Chemical Pha |
| CHO Pharma |
Johnson Chemical and CHO Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Chemical and CHO Pharma
The main advantage of trading using opposite Johnson Chemical and CHO Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Chemical position performs unexpectedly, CHO Pharma 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 CHO Pharma will offset losses from the drop in CHO Pharma's long position.| Johnson Chemical vs. CHC Healthcare Group | Johnson Chemical vs. GenMont Biotech | Johnson Chemical vs. Sinphar Pharmaceutical Co | Johnson Chemical vs. Abnova Taiwan Corp |
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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 Channel module to use Commodity Channel Index to analyze current equity momentum.
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