Correlation Between Est Global and Johnson Health

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

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

Diversification Opportunities for Est Global and Johnson Health

-0.22

Correlation Coefficient

Est Global  Johnson Health

Very good diversification

The 3 months correlation between Est and Johnson is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Est Global Apparel 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 Est Global 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 Est Global Apparel 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 Est Global i.e., Est Global and Johnson Health go up and down completely randomly.

Pair Corralation between Est Global and Johnson Health

Assuming the 90 days trading horizon Est Global Apparel is expected to under-perform the Johnson Health. But the stock apears to be less risky and, when comparing its historical volatility, Est Global Apparel is 1.02 times less risky than Johnson Health. The stock trades about -0.01 of its potential returns per unit of risk. The Johnson Health Tech is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  15,350  in Johnson Health Tech on October 10, 2024 and sell it today you would earn a total of  2,700  from holding Johnson Health Tech or generate 17.59% return on investment over 90 days.

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

Est Global Apparel  vs.  Johnson Health Tech

Est Global Apparel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Est Global Apparel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Est Global 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 Est Global and Johnson Health

The main advantage of trading using opposite Est Global and Johnson Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Est Global 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 Est Global Apparel 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.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.