Correlation Between Cheng Shin and Johnson Health

Can any of the company-specific risk be diversified away by investing in both Cheng Shin and Johnson Health 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 Cheng Shin and Johnson Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cheng Shin Rubber and Johnson Health Tech, you can compare the effects of market volatilities on Cheng Shin and Johnson Health 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 Cheng Shin with a short position of Johnson Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheng Shin and Johnson Health.

Diversification Opportunities for Cheng Shin and Johnson Health

0.36

Correlation Coefficient

Cheng Shin  Johnson Health

Weak diversification

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

Pair Corralation between Cheng Shin and Johnson Health

Assuming the 90 days trading horizon Cheng Shin is expected to generate 16.61 times less return on investment than Johnson Health. But when comparing it to its historical volatility, Cheng Shin Rubber is 1.88 times less risky than Johnson Health. It trades about 0.01 of its potential returns per unit of risk. Johnson Health Tech is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  15,000  in Johnson Health Tech on October 14, 2024 and sell it today you would earn a total of  3,000  from holding Johnson Health Tech or generate 20.0% return on investment over 90 days.

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

Cheng Shin Rubber  vs.  Johnson Health Tech

Cheng Shin Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cheng Shin Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Cheng Shin is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Johnson Health Tech

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Health Tech are ranked lower than 7 (%) 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.

Pair Trading with Cheng Shin and Johnson Health

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

The idea behind Cheng Shin Rubber and Johnson Health Tech 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.