Correlation Between Eastern and Johnson Outdoors
Can any of the company-specific risk be diversified away by investing in both Eastern and Johnson Outdoors 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 Eastern and Johnson Outdoors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastern Co and Johnson Outdoors, you can compare the effects of market volatilities on Eastern and Johnson Outdoors 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 Eastern with a short position of Johnson Outdoors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern and Johnson Outdoors.
Diversification Opportunities for Eastern and Johnson Outdoors
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Eastern and Johnson is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and Johnson Outdoors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Outdoors and Eastern 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 Eastern Co are associated (or correlated) with Johnson Outdoors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Outdoors has no effect on the direction of Eastern i.e., Eastern and Johnson Outdoors go up and down completely randomly.
Pair Corralation between Eastern and Johnson Outdoors
Considering the 90-day investment horizon Eastern Co is expected to under-perform the Johnson Outdoors. In addition to that, Eastern is 1.45 times more volatile than Johnson Outdoors. It trades about -0.13 of its total potential returns per unit of risk. Johnson Outdoors is currently generating about 0.1 per unit of volatility. If you would invest 3,216 in Johnson Outdoors on August 26, 2024 and sell it today you would earn a total of 121.00 from holding Johnson Outdoors or generate 3.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastern Co vs. Johnson Outdoors
Performance |
| Timeline |
| Eastern |
| Johnson Outdoors |
Eastern and Johnson Outdoors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastern and Johnson Outdoors
The main advantage of trading using opposite Eastern and Johnson Outdoors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern position performs unexpectedly, Johnson Outdoors 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 Outdoors will offset losses from the drop in Johnson Outdoors' long position.| Eastern vs. Timken Company | Eastern vs. Lincoln Electric Holdings | Eastern vs. Hillman Solutions Corp | Eastern vs. AB SKF |
| Johnson Outdoors vs. Vista Outdoor | Johnson Outdoors vs. Clarus Corp | Johnson Outdoors vs. Escalade Incorporated | Johnson Outdoors vs. JAKKS Pacific |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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