Correlation Between Giant Manufacturing and Johnson Health

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

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

Diversification Opportunities for Giant Manufacturing and Johnson Health

-0.61

Correlation Coefficient

Giant Manufacturing  Johnson Health

Excellent diversification

The 3 months correlation between Giant and Johnson is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Giant Manufacturing Co and Johnson Health Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Health Tech and Giant Manufacturing 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 Giant Manufacturing Co are associated (or correlated) with Johnson Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Health Tech has no effect on the direction of Giant Manufacturing i.e., Giant Manufacturing and Johnson Health go up and down completely randomly.

Pair Corralation between Giant Manufacturing and Johnson Health

Assuming the 90 days trading horizon Giant Manufacturing Co is expected to under-perform the Johnson Health. But the stock apears to be less risky and, when comparing its historical volatility, Giant Manufacturing Co is 2.11 times less risky than Johnson Health. The stock trades about -0.41 of its potential returns per unit of risk. The Johnson Health Tech is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  15,150  in Johnson Health Tech on August 31, 2024 and sell it today you would earn a total of  300.00  from holding Johnson Health Tech or generate 1.98% return on investment over 90 days.

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

Giant Manufacturing Co  vs.  Johnson Health Tech

Giant Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Giant Manufacturing Co 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 December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Johnson Health Tech

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Health Tech are ranked lower than 8 (%) 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.

Pair Trading with Giant Manufacturing and Johnson Health

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

The idea behind Giant Manufacturing Co and Johnson Health Tech 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.