Correlation Between Dynamic Medical and Johnson Health

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

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

Diversification Opportunities for Dynamic Medical and Johnson Health

0.5

Correlation Coefficient

Dynamic Medical  Johnson Health

Very weak diversification

The 3 months correlation between Dynamic and Johnson is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Medical Technologies 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 Dynamic Medical 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 Dynamic Medical Technologies 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 Dynamic Medical i.e., Dynamic Medical and Johnson Health go up and down completely randomly.

Pair Corralation between Dynamic Medical and Johnson Health

Assuming the 90 days trading horizon Dynamic Medical is expected to generate 1.55 times less return on investment than Johnson Health. But when comparing it to its historical volatility, Dynamic Medical Technologies is 4.03 times less risky than Johnson Health. It trades about 0.06 of its potential returns per unit of risk. Johnson Health Tech is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  19,000  in Johnson Health Tech on December 23, 2024 and sell it today you would earn a total of  200.00  from holding Johnson Health Tech or generate 1.05% return on investment over 90 days.

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

Dynamic Medical Technologies  vs.  Johnson Health Tech

Dynamic Medical Tech

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Medical Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Dynamic Medical 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

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.

Pair Trading with Dynamic Medical and Johnson Health

The main advantage of trading using opposite Dynamic Medical and Johnson Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynamic Medical 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 Dynamic Medical Technologies 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.