Correlation Between Johnson Health and PChome Online

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

Diversification Opportunities for Johnson Health and PChome Online

0.57

Correlation Coefficient

Johnson Health  PChome Online

Very weak diversification

The 3 months correlation between Johnson and PChome is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Health Tech and PChome Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PChome Online 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 PChome Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PChome Online has no effect on the direction of Johnson Health i.e., Johnson Health and PChome Online go up and down completely randomly.

Pair Corralation between Johnson Health and PChome Online

Assuming the 90 days trading horizon Johnson Health Tech is expected to generate 0.8 times more return on investment than PChome Online. However, Johnson Health Tech is 1.25 times less risky than PChome Online. It trades about 0.43 of its potential returns per unit of risk. PChome Online is currently generating about -0.03 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Johnson Health Tech  vs.  PChome Online

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.

PChome Online

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PChome Online are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, PChome Online showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Johnson Health and PChome Online

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

The idea behind Johnson Health Tech and PChome Online 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.