Correlation Between Johnson Chemical and Acelon Chemicals

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

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

Diversification Opportunities for Johnson Chemical and Acelon Chemicals

0.62

Correlation Coefficient

Johnson Chemical  Acelon Chemicals

Poor diversification

The 3 months correlation between Johnson and Acelon is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Chemical Pharmaceutica and Acelon Chemicals Fiber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acelon Chemicals Fiber and Johnson 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 Johnson Chemical Pharmaceutical are associated (or correlated) with Acelon Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acelon Chemicals Fiber has no effect on the direction of Johnson Chemical i.e., Johnson Chemical and Acelon Chemicals go up and down completely randomly.

Pair Corralation between Johnson Chemical and Acelon Chemicals

Assuming the 90 days trading horizon Johnson Chemical is expected to generate 7.31 times less return on investment than Acelon Chemicals. But when comparing it to its historical volatility, Johnson Chemical Pharmaceutical is 1.62 times less risky than Acelon Chemicals. It trades about 0.05 of its potential returns per unit of risk. Acelon Chemicals Fiber is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,190  in Acelon Chemicals Fiber on December 24, 2024 and sell it today you would earn a total of  540.00  from holding Acelon Chemicals Fiber or generate 45.38% return on investment over 90 days.

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

Johnson Chemical Pharmaceutica  vs.  Acelon Chemicals Fiber

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.

Acelon Chemicals Fiber

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Acelon Chemicals Fiber are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Acelon Chemicals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Johnson Chemical and Acelon Chemicals

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

The idea behind Johnson Chemical Pharmaceutical and Acelon Chemicals Fiber 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.