Correlation Between Johnson Chemical and CHC Healthcare

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

Diversification Opportunities for Johnson Chemical and CHC Healthcare

-0.42

Correlation Coefficient

Johnson Chemical  CHC Healthcare

Very good diversification

The 3 months correlation between Johnson and CHC is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Chemical Pharmaceutica and CHC Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHC Healthcare Group 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 CHC Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHC Healthcare Group has no effect on the direction of Johnson Chemical i.e., Johnson Chemical and CHC Healthcare go up and down completely randomly.

Pair Corralation between Johnson Chemical and CHC Healthcare

Assuming the 90 days trading horizon Johnson Chemical Pharmaceutical is expected to generate 2.37 times more return on investment than CHC Healthcare. However, Johnson Chemical is 2.37 times more volatile than CHC Healthcare Group. It trades about 0.07 of its potential returns per unit of risk. CHC Healthcare Group is currently generating about 0.0 per unit of risk. If you would invest  6,910  in Johnson Chemical Pharmaceutical on September 25, 2024 and sell it today you would earn a total of  260.00  from holding Johnson Chemical Pharmaceutical or generate 3.76% return on investment over 90 days.

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

Johnson Chemical Pharmaceutica  vs.  CHC Healthcare Group

Johnson Chemical Pha

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Chemical Pharmaceutical are ranked lower than 3 (%) 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.

CHC Healthcare Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHC Healthcare Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, CHC Healthcare 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 Johnson Chemical and CHC Healthcare

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

The idea behind Johnson Chemical Pharmaceutical and CHC Healthcare Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.