Correlation Between Johnson Institutional and Johnson Municipal

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

By analyzing existing cross correlation between Johnson Institutional Short and Johnson Municipal Income, you can compare the effects of market volatilities on Johnson Institutional and Johnson Municipal 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 Institutional with a short position of Johnson Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Institutional and Johnson Municipal.

Diversification Opportunities for Johnson Institutional and Johnson Municipal

0.57

Correlation Coefficient

Johnson Institutional  Johnson Municipal

Very weak diversification

The 3 months correlation between Johnson and Johnson is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Institutional Short and Johnson Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Municipal Income and Johnson Institutional 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 Institutional Short are associated (or correlated) with Johnson Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Municipal Income has no effect on the direction of Johnson Institutional i.e., Johnson Institutional and Johnson Municipal go up and down completely randomly.

Pair Corralation between Johnson Institutional and Johnson Municipal

Assuming the 90 days horizon Johnson Institutional Short is expected to under-perform the Johnson Municipal. But the mutual fund apears to be less risky and, when comparing its historical volatility, Johnson Institutional Short is 2.29 times less risky than Johnson Municipal. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Johnson Municipal Income is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,648  in Johnson Municipal Income on September 12, 2024 and sell it today you would earn a total of  14.00  from holding Johnson Municipal Income or generate 0.85% return on investment over 90 days.

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

Johnson Institutional Short  vs.  Johnson Municipal Income

Johnson Institutional

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Johnson Institutional Short has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Johnson Institutional is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Johnson Municipal Income

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Municipal Income are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Johnson Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Johnson Institutional and Johnson Municipal

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

The idea behind Johnson Institutional Short and Johnson Municipal Income 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.