Correlation Between Johnson Health and Kao Fong

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

Diversification Opportunities for Johnson Health and Kao Fong

-0.22

Correlation Coefficient

Johnson Health  Kao Fong

Very good diversification

The 3 months correlation between Johnson and Kao is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Health Tech and Kao Fong Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kao Fong Machinery 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 Kao Fong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kao Fong Machinery has no effect on the direction of Johnson Health i.e., Johnson Health and Kao Fong go up and down completely randomly.

Pair Corralation between Johnson Health and Kao Fong

Assuming the 90 days trading horizon Johnson Health Tech is expected to generate 0.88 times more return on investment than Kao Fong. However, Johnson Health Tech is 1.14 times less risky than Kao Fong. It trades about 0.23 of its potential returns per unit of risk. Kao Fong Machinery is currently generating about -0.03 per unit of risk. If you would invest  11,900  in Johnson Health Tech on September 16, 2024 and sell it today you would earn a total of  7,650  from holding Johnson Health Tech or generate 64.29% return on investment over 90 days.

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

Johnson Health Tech  vs.  Kao Fong Machinery

Johnson Health Tech

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Health Tech are ranked lower than 17 (%) 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.

Kao Fong Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kao Fong Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Johnson Health and Kao Fong

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

The idea behind Johnson Health Tech and Kao Fong Machinery 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.