Correlation Between Johnson Chemical and Standard Chemical
Can any of the company-specific risk be diversified away by investing in both Johnson Chemical and Standard 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 Johnson Chemical and Standard Chemical 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 Standard Chemical Pharmaceutical, you can compare the effects of market volatilities on Johnson Chemical and Standard 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 Johnson Chemical with a short position of Standard Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Chemical and Standard Chemical.
Diversification Opportunities for Johnson Chemical and Standard Chemical
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Johnson and Standard is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Chemical Pharmaceutica and Standard Chemical Pharmaceutic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Chemical 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 Standard Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Chemical has no effect on the direction of Johnson Chemical i.e., Johnson Chemical and Standard Chemical go up and down completely randomly.
Pair Corralation between Johnson Chemical and Standard Chemical
Assuming the 90 days trading horizon Johnson Chemical Pharmaceutical is expected to generate 3.24 times more return on investment than Standard Chemical. However, Johnson Chemical is 3.24 times more volatile than Standard Chemical Pharmaceutical. It trades about 0.07 of its potential returns per unit of risk. Standard Chemical Pharmaceutical is currently generating about -0.29 per unit of risk. If you would invest 6,910 in Johnson Chemical Pharmaceutical on September 24, 2024 and sell it today you would earn a total of 250.00 from holding Johnson Chemical Pharmaceutical or generate 3.62% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Johnson Chemical Pharmaceutica vs. Standard Chemical Pharmaceutic
Performance |
Timeline |
Johnson Chemical Pha |
Standard Chemical |
Johnson Chemical and Standard Chemical Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Johnson Chemical and Standard Chemical
The main advantage of trading using opposite Johnson Chemical and Standard Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Chemical position performs unexpectedly, Standard 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 Standard Chemical will offset losses from the drop in Standard Chemical's long position.Johnson Chemical vs. Formosa Chemicals Fibre | Johnson Chemical vs. Wonderful Hi Tech Co | Johnson Chemical vs. Quanta Computer | Johnson Chemical vs. Emerging Display Technologies |
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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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