Correlation Between Hsinli Chemical and Johnson Chemical

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

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

Diversification Opportunities for Hsinli Chemical and Johnson Chemical

0.64

Correlation Coefficient

Hsinli Chemical  Johnson Chemical

Poor diversification

The 3 months correlation between Hsinli and Johnson is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hsinli Chemical Industrial 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 Hsinli Chemical 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 Hsinli Chemical Industrial 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 Hsinli Chemical i.e., Hsinli Chemical and Johnson Chemical go up and down completely randomly.

Pair Corralation between Hsinli Chemical and Johnson Chemical

Assuming the 90 days trading horizon Hsinli Chemical Industrial is expected to generate 1.89 times more return on investment than Johnson Chemical. However, Hsinli Chemical is 1.89 times more volatile than Johnson Chemical Pharmaceutical. It trades about 0.29 of its potential returns per unit of risk. Johnson Chemical Pharmaceutical is currently generating about 0.05 per unit of risk. If you would invest  4,835  in Hsinli Chemical Industrial on December 24, 2024 and sell it today you would earn a total of  3,565  from holding Hsinli Chemical Industrial or generate 73.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.25%
Values	Daily Returns

Hsinli Chemical Industrial  vs.  Johnson Chemical Pharmaceutica

Hsinli Chemical Indu

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Hsinli Chemical Industrial are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hsinli Chemical showed solid returns over the last few months and may actually be approaching a breakup point.

Johnson Chemical Pha

Risk-Adjusted Performance

Insignificant

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

The main advantage of trading using opposite Hsinli Chemical and Johnson Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hsinli Chemical 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 Hsinli Chemical Industrial 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.