Correlation Between Johnson Health and Advanced International

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

Diversification Opportunities for Johnson Health and Advanced International

-0.64

Correlation Coefficient

Johnson Health  Advanced International

Excellent diversification

The 3 months correlation between Johnson and Advanced is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Health Tech and Advanced International Multite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced International 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 Advanced International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced International has no effect on the direction of Johnson Health i.e., Johnson Health and Advanced International go up and down completely randomly.

Pair Corralation between Johnson Health and Advanced International

Assuming the 90 days trading horizon Johnson Health Tech is expected to generate 5.4 times more return on investment than Advanced International. However, Johnson Health is 5.4 times more volatile than Advanced International Multitech. It trades about 0.27 of its potential returns per unit of risk. Advanced International Multitech is currently generating about -0.34 per unit of risk. If you would invest  14,600  in Johnson Health Tech on September 19, 2024 and sell it today you would earn a total of  3,300  from holding Johnson Health Tech or generate 22.6% return on investment over 90 days.

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

Johnson Health Tech  vs.  Advanced International Multite

Johnson Health Tech

Risk-Adjusted Performance

13 of 100

Solid

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.

Advanced International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced International Multitech 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 Advanced International

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

The idea behind Johnson Health Tech and Advanced International Multitech 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.