Correlation Between Johnson Health and Amtran Technology

Can any of the company-specific risk be diversified away by investing in both Johnson Health and Amtran Technology 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 Amtran Technology 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 Amtran Technology Co, you can compare the effects of market volatilities on Johnson Health and Amtran Technology 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 Amtran Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Health and Amtran Technology.

Diversification Opportunities for Johnson Health and Amtran Technology

-0.58

Correlation Coefficient

Johnson Health  Amtran Technology

Excellent diversification

The 3 months correlation between Johnson and Amtran is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Health Tech and Amtran Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amtran Technology 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 Amtran Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amtran Technology has no effect on the direction of Johnson Health i.e., Johnson Health and Amtran Technology go up and down completely randomly.

Pair Corralation between Johnson Health and Amtran Technology

Assuming the 90 days trading horizon Johnson Health Tech is expected to generate 2.66 times more return on investment than Amtran Technology. However, Johnson Health is 2.66 times more volatile than Amtran Technology Co. It trades about 0.27 of its potential returns per unit of risk. Amtran Technology Co is currently generating about -0.24 per unit of risk. If you would invest  15,600  in Johnson Health Tech on September 25, 2024 and sell it today you would earn a total of  3,600  from holding Johnson Health Tech or generate 23.08% 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.  Amtran Technology Co

Johnson Health Tech

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Health Tech are ranked lower than 13 (%) 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.

Amtran Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amtran Technology 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 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 Amtran Technology

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

The idea behind Johnson Health Tech and Amtran Technology Co 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.