Correlation Between Johnson Health and Topkey Corp

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

Diversification Opportunities for Johnson Health and Topkey Corp

-0.36

Correlation Coefficient

Johnson Health  Topkey Corp

Very good diversification

The 3 months correlation between Johnson and Topkey is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Health Tech and Topkey Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topkey Corp 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 Topkey Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topkey Corp has no effect on the direction of Johnson Health i.e., Johnson Health and Topkey Corp go up and down completely randomly.

Pair Corralation between Johnson Health and Topkey Corp

Assuming the 90 days trading horizon Johnson Health Tech is expected to generate 2.14 times more return on investment than Topkey Corp. However, Johnson Health is 2.14 times more volatile than Topkey Corp. It trades about 0.18 of its potential returns per unit of risk. Topkey Corp is currently generating about -0.11 per unit of risk. If you would invest  12,200  in Johnson Health Tech on September 19, 2024 and sell it today you would earn a total of  5,700  from holding Johnson Health Tech or generate 46.72% 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.  Topkey Corp

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.

Topkey Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Topkey Corp 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 Topkey Corp

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

The idea behind Johnson Health Tech and Topkey Corp 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 Global Correlations module to find global opportunities by holding instruments from different markets.