Correlation Between Life Clips and Johnson Outdoors

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Can any of the company-specific risk be diversified away by investing in both Life Clips 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 Life Clips and Johnson Outdoors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Life Clips and Johnson Outdoors, you can compare the effects of market volatilities on Life Clips 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 Life Clips with a short position of Johnson Outdoors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Life Clips and Johnson Outdoors.

Diversification Opportunities for Life Clips and Johnson Outdoors

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Life and Johnson is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Life Clips and Johnson Outdoors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Outdoors and Life Clips 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 Life Clips 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 Life Clips i.e., Life Clips and Johnson Outdoors go up and down completely randomly.

Pair Corralation between Life Clips and Johnson Outdoors

Given the investment horizon of 90 days Life Clips is expected to under-perform the Johnson Outdoors. In addition to that, Life Clips is 4.52 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 -0.05 per unit of volatility. If you would invest  6,418  in Johnson Outdoors on September 2, 2024 and sell it today you would lose (3,052) from holding Johnson Outdoors or give up 47.55% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy30.85%
ValuesDaily Returns

Life Clips  vs.  Johnson Outdoors

 Performance 
       Timeline  
Life Clips 

Risk-Adjusted Performance

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Over the last 90 days Life Clips has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, Life Clips is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.
Johnson Outdoors 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Johnson Outdoors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Johnson Outdoors is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Life Clips and Johnson Outdoors Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Life Clips and Johnson Outdoors

The main advantage of trading using opposite Life Clips and Johnson Outdoors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life Clips 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.
The idea behind Life Clips and Johnson Outdoors 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.
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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