Correlation Between Johnson Chemical and San Fu

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

Diversification Opportunities for Johnson Chemical and San Fu

-0.22

Correlation Coefficient

Johnson Chemical  San Fu

Very good diversification

The 3 months correlation between Johnson and San is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Chemical Pharmaceutica and San Fu Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on San Fu 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 San Fu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of San Fu Chemical has no effect on the direction of Johnson Chemical i.e., Johnson Chemical and San Fu go up and down completely randomly.

Pair Corralation between Johnson Chemical and San Fu

Assuming the 90 days trading horizon Johnson Chemical Pharmaceutical is expected to under-perform the San Fu. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Chemical Pharmaceutical is 1.27 times less risky than San Fu. The stock trades about -0.03 of its potential returns per unit of risk. The San Fu Chemical is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  12,700  in San Fu Chemical on October 9, 2024 and sell it today you would earn a total of  450.00  from holding San Fu Chemical or generate 3.54% 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.  San Fu Chemical

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.

San Fu Chemical

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in San Fu Chemical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, San Fu 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 San Fu

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

The idea behind Johnson Chemical Pharmaceutical and San Fu Chemical 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.