Correlation Between Bright Led and Johnson Chemical

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

By analyzing existing cross correlation between Bright Led Electronics and Johnson Chemical Pharmaceutical, you can compare the effects of market volatilities on Bright Led and Johnson Chemical 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 Bright Led with a short position of Johnson Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bright Led and Johnson Chemical.

Diversification Opportunities for Bright Led and Johnson Chemical

-0.11

Correlation Coefficient

Bright Led  Johnson Chemical

Good diversification

The 3 months correlation between Bright and Johnson is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Bright Led Electronics and Johnson Chemical Pharmaceutica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Chemical Pha and Bright Led 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 Bright Led Electronics are associated (or correlated) with Johnson Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Chemical Pha has no effect on the direction of Bright Led i.e., Bright Led and Johnson Chemical go up and down completely randomly.

Pair Corralation between Bright Led and Johnson Chemical

Assuming the 90 days trading horizon Bright Led Electronics is expected to generate 1.25 times more return on investment than Johnson Chemical. However, Bright Led is 1.25 times more volatile than Johnson Chemical Pharmaceutical. It trades about 0.0 of its potential returns per unit of risk. Johnson Chemical Pharmaceutical is currently generating about -0.02 per unit of risk. If you would invest  2,310  in Bright Led Electronics on October 25, 2024 and sell it today you would lose (55.00) from holding Bright Led Electronics or give up 2.38% of portfolio value over 90 days.

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

Bright Led Electronics  vs.  Johnson Chemical Pharmaceutica

Bright Led Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Johnson Chemical Pha

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bright Led and Johnson Chemical

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

The idea behind Bright Led Electronics and Johnson Chemical Pharmaceutical 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.