Correlation Between Johnson Outdoors and Eastern
Can any of the company-specific risk be diversified away by investing in both Johnson Outdoors and Eastern 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 Outdoors and Eastern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Outdoors and Eastern Co, you can compare the effects of market volatilities on Johnson Outdoors and Eastern 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 Outdoors with a short position of Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Outdoors and Eastern.
Diversification Opportunities for Johnson Outdoors and Eastern
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Johnson and Eastern is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Outdoors and Eastern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern and Johnson Outdoors 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 Outdoors are associated (or correlated) with Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern has no effect on the direction of Johnson Outdoors i.e., Johnson Outdoors and Eastern go up and down completely randomly.
Pair Corralation between Johnson Outdoors and Eastern
Given the investment horizon of 90 days Johnson Outdoors is expected to generate 0.82 times more return on investment than Eastern. However, Johnson Outdoors is 1.21 times less risky than Eastern. It trades about 0.06 of its potential returns per unit of risk. Eastern Co is currently generating about -0.16 per unit of risk. If you would invest 3,247 in Johnson Outdoors on August 30, 2024 and sell it today you would earn a total of 82.00 from holding Johnson Outdoors or generate 2.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Outdoors vs. Eastern Co
Performance |
| Timeline |
| Johnson Outdoors |
| Eastern |
Johnson Outdoors and Eastern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Outdoors and Eastern
The main advantage of trading using opposite Johnson Outdoors and Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Outdoors position performs unexpectedly, Eastern 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 Eastern will offset losses from the drop in Eastern's long position.| Johnson Outdoors vs. Vista Outdoor | Johnson Outdoors vs. Clarus Corp | Johnson Outdoors vs. Escalade Incorporated | Johnson Outdoors vs. JAKKS Pacific |
| Eastern vs. Timken Company | Eastern vs. Lincoln Electric Holdings | Eastern vs. AB SKF | Eastern vs. Kennametal |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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