Correlation Between Hong Ho and Johnson Chemical

Can any of the company-specific risk be diversified away by investing in both Hong Ho 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 Hong Ho and Johnson Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hong Ho Precision and Johnson Chemical Pharmaceutical, you can compare the effects of market volatilities on Hong Ho 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 Hong Ho with a short position of Johnson Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Ho and Johnson Chemical.

Diversification Opportunities for Hong Ho and Johnson Chemical

-0.35

Correlation Coefficient

Hong Ho  Johnson Chemical

Very good diversification

The 3 months correlation between Hong and Johnson is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Hong Ho Precision 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 Hong Ho 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 Hong Ho Precision 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 Hong Ho i.e., Hong Ho and Johnson Chemical go up and down completely randomly.

Pair Corralation between Hong Ho and Johnson Chemical

Assuming the 90 days trading horizon Hong Ho Precision is expected to under-perform the Johnson Chemical. In addition to that, Hong Ho is 1.67 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 0.05 per unit of volatility. If you would invest  6,770  in Johnson Chemical Pharmaceutical on September 28, 2024 and sell it today you would earn a total of  330.00  from holding Johnson Chemical Pharmaceutical or generate 4.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Hong Ho Precision  vs.  Johnson Chemical Pharmaceutica

Hong Ho Precision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hong Ho Precision has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Johnson Chemical Pha

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Chemical Pharmaceutical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Johnson Chemical is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Hong Ho and Johnson Chemical

The main advantage of trading using opposite Hong Ho and Johnson Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Ho 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 Hong Ho Precision 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.