Correlation Between Johnson Health and New Advanced

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

By analyzing existing cross correlation between Johnson Health Tech and New Advanced Electronics, you can compare the effects of market volatilities on Johnson Health and New Advanced 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 Health with a short position of New Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Health and New Advanced.

Diversification Opportunities for Johnson Health and New Advanced

-0.53

Correlation Coefficient

Johnson Health  New Advanced

Excellent diversification

The 3 months correlation between Johnson and New is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Health Tech and New Advanced Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Advanced Electronics and Johnson Health 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 Health Tech are associated (or correlated) with New Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Advanced Electronics has no effect on the direction of Johnson Health i.e., Johnson Health and New Advanced go up and down completely randomly.

Pair Corralation between Johnson Health and New Advanced

Assuming the 90 days trading horizon Johnson Health Tech is expected to generate 1.71 times more return on investment than New Advanced. However, Johnson Health is 1.71 times more volatile than New Advanced Electronics. It trades about 0.15 of its potential returns per unit of risk. New Advanced Electronics is currently generating about -0.09 per unit of risk. If you would invest  9,790  in Johnson Health Tech on September 13, 2024 and sell it today you would earn a total of  9,660  from holding Johnson Health Tech or generate 98.67% return on investment over 90 days.

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

Johnson Health Tech  vs.  New Advanced Electronics

Johnson Health Tech

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Health Tech are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Johnson Health showed solid returns over the last few months and may actually be approaching a breakup point.

New Advanced Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Advanced Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Johnson Health and New Advanced

The main advantage of trading using opposite Johnson Health and New Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Health position performs unexpectedly, New Advanced 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 New Advanced will offset losses from the drop in New Advanced's long position.

The idea behind Johnson Health Tech and New Advanced Electronics 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.