Correlation Between Johnson Health and Tai Tung

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

Diversification Opportunities for Johnson Health and Tai Tung

-0.36

Correlation Coefficient

Johnson Health  Tai Tung

Very good diversification

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

Pair Corralation between Johnson Health and Tai Tung

Assuming the 90 days trading horizon Johnson Health Tech is expected to generate 1.67 times more return on investment than Tai Tung. However, Johnson Health is 1.67 times more volatile than Tai Tung Communication. It trades about 0.43 of its potential returns per unit of risk. Tai Tung Communication is currently generating about -0.27 per unit of risk. If you would invest  14,600  in Johnson Health Tech on September 16, 2024 and sell it today you would earn a total of  4,950  from holding Johnson Health Tech or generate 33.9% 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.  Tai Tung Communication

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.

Tai Tung Communication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tai Tung Communication has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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 Tai Tung

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

The idea behind Johnson Health Tech and Tai Tung Communication 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.