Correlation Between Johnson Chemical and Gigasolar Materials

Can any of the company-specific risk be diversified away by investing in both Johnson Chemical and Gigasolar Materials 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 Gigasolar Materials 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 Gigasolar Materials, you can compare the effects of market volatilities on Johnson Chemical and Gigasolar Materials 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 Gigasolar Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Chemical and Gigasolar Materials.

Diversification Opportunities for Johnson Chemical and Gigasolar Materials

-0.43

Correlation Coefficient

Johnson Chemical  Gigasolar Materials

Very good diversification

The 3 months correlation between Johnson and Gigasolar is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Chemical Pharmaceutica and Gigasolar Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gigasolar Materials 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 Gigasolar Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gigasolar Materials has no effect on the direction of Johnson Chemical i.e., Johnson Chemical and Gigasolar Materials go up and down completely randomly.

Pair Corralation between Johnson Chemical and Gigasolar Materials

Assuming the 90 days trading horizon Johnson Chemical Pharmaceutical is expected to under-perform the Gigasolar Materials. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Chemical Pharmaceutical is 1.52 times less risky than Gigasolar Materials. The stock trades about -0.03 of its potential returns per unit of risk. The Gigasolar Materials is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  8,440  in Gigasolar Materials on September 15, 2024 and sell it today you would lose (540.00) from holding Gigasolar Materials or give up 6.4% of portfolio value over 90 days.

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

Johnson Chemical Pharmaceutica  vs.  Gigasolar Materials

Johnson Chemical Pha

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Chemical Pharmaceutical are ranked lower than 1 (%) 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.

Gigasolar Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gigasolar Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Johnson Chemical and Gigasolar Materials

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

The idea behind Johnson Chemical Pharmaceutical and Gigasolar Materials 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.