Correlation Between ADLINK Technology and Johnson Chemical
Can any of the company-specific risk be diversified away by investing in both ADLINK 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 ADLINK 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 ADLINK Technology and Johnson Chemical Pharmaceutical, you can compare the effects of market volatilities on ADLINK 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 ADLINK Technology with a short position of Johnson Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADLINK Technology and Johnson Chemical.
Diversification Opportunities for ADLINK Technology and Johnson Chemical
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ADLINK and Johnson is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding ADLINK Technology 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 ADLINK 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 ADLINK Technology 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 ADLINK Technology i.e., ADLINK Technology and Johnson Chemical go up and down completely randomly.
Pair Corralation between ADLINK Technology and Johnson Chemical
Assuming the 90 days trading horizon ADLINK Technology is expected to under-perform the Johnson Chemical. In addition to that, ADLINK Technology is 1.29 times more volatile than Johnson Chemical Pharmaceutical. It trades about -0.04 of its total potential returns per unit of risk. Johnson Chemical Pharmaceutical is currently generating about -0.04 per unit of volatility. If you would invest 7,190 in Johnson Chemical Pharmaceutical on November 7, 2024 and sell it today you would lose (100.00) from holding Johnson Chemical Pharmaceutical or give up 1.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ADLINK Technology vs. Johnson Chemical Pharmaceutica
Performance |
| Timeline |
| ADLINK Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
| Johnson Chemical Pha |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
ADLINK Technology and Johnson Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ADLINK Technology and Johnson Chemical
The main advantage of trading using opposite ADLINK Technology and Johnson Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADLINK 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 ADLINK Technology 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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