Correlation Between Posiflex Technology and Johnson Health
Can any of the company-specific risk be diversified away by investing in both Posiflex Technology and Johnson Health 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 Posiflex Technology and Johnson Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Posiflex Technology and Johnson Health Tech, you can compare the effects of market volatilities on Posiflex Technology and Johnson Health 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 Posiflex Technology with a short position of Johnson Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Posiflex Technology and Johnson Health.
Diversification Opportunities for Posiflex Technology and Johnson Health
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Posiflex and Johnson is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Posiflex Technology and Johnson Health Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Health Tech and Posiflex 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 Posiflex Technology are associated (or correlated) with Johnson Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Health Tech has no effect on the direction of Posiflex Technology i.e., Posiflex Technology and Johnson Health go up and down completely randomly.
Pair Corralation between Posiflex Technology and Johnson Health
Assuming the 90 days trading horizon Posiflex Technology is expected to generate 0.72 times more return on investment than Johnson Health. However, Posiflex Technology is 1.38 times less risky than Johnson Health. It trades about 0.22 of its potential returns per unit of risk. Johnson Health Tech is currently generating about 0.16 per unit of risk. If you would invest 17,100 in Posiflex Technology on November 3, 2024 and sell it today you would earn a total of 16,550 from holding Posiflex Technology or generate 96.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Posiflex Technology vs. Johnson Health Tech
Performance |
| Timeline |
| Posiflex Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| Johnson Health Tech |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
Posiflex Technology and Johnson Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Posiflex Technology and Johnson Health
The main advantage of trading using opposite Posiflex Technology and Johnson Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Posiflex Technology position performs unexpectedly, Johnson Health 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 Health will offset losses from the drop in Johnson Health's long position.The idea behind Posiflex Technology and Johnson Health Tech 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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