Correlation Between Johnson Health and Power Wind

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

Diversification Opportunities for Johnson Health and Power Wind

0.35

Correlation Coefficient

Johnson Health  Power Wind

Weak diversification

The 3 months correlation between Johnson and Power is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Health Tech and Power Wind Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Wind Health 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 Power Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Wind Health has no effect on the direction of Johnson Health i.e., Johnson Health and Power Wind go up and down completely randomly.

Pair Corralation between Johnson Health and Power Wind

Assuming the 90 days trading horizon Johnson Health is expected to generate 5.04 times less return on investment than Power Wind. In addition to that, Johnson Health is 1.67 times more volatile than Power Wind Health. It trades about 0.02 of its total potential returns per unit of risk. Power Wind Health is currently generating about 0.14 per unit of volatility. If you would invest  11,350  in Power Wind Health on December 24, 2024 and sell it today you would earn a total of  1,900  from holding Power Wind Health or generate 16.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Johnson Health Tech  vs.  Power Wind Health

Johnson Health Tech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Health Tech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Johnson Health is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Power Wind Health

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Power Wind Health are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Power Wind showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Johnson Health and Power Wind

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

The idea behind Johnson Health Tech and Power Wind Health 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.