Correlation Between Johnson Outdoors and Heidrick Struggles

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

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

Diversification Opportunities for Johnson Outdoors and Heidrick Struggles

-0.4

Correlation Coefficient

Johnson Outdoors  Heidrick Struggles

Very good diversification

The 3 months correlation between Johnson and Heidrick is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Outdoors and Heidrick Struggles Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heidrick Struggles and Johnson Outdoors 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 Outdoors are associated (or correlated) with Heidrick Struggles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heidrick Struggles has no effect on the direction of Johnson Outdoors i.e., Johnson Outdoors and Heidrick Struggles go up and down completely randomly.

Pair Corralation between Johnson Outdoors and Heidrick Struggles

Given the investment horizon of 90 days Johnson Outdoors is expected to generate 5.8 times less return on investment than Heidrick Struggles. But when comparing it to its historical volatility, Johnson Outdoors is 1.5 times less risky than Heidrick Struggles. It trades about 0.06 of its potential returns per unit of risk. Heidrick Struggles International is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3,921  in Heidrick Struggles International on August 30, 2024 and sell it today you would earn a total of  692.00  from holding Heidrick Struggles International or generate 17.65% return on investment over 90 days.

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

Johnson Outdoors  vs.  Heidrick Struggles Internation

Johnson Outdoors

Risk-Adjusted Performance

0 of 100

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Heidrick Struggles

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heidrick Struggles International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Heidrick Struggles demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Johnson Outdoors and Heidrick Struggles

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

The idea behind Johnson Outdoors and Heidrick Struggles International 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.