Correlation Between Tai Tung and Johnson Health

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

By analyzing existing cross correlation between Tai Tung Communication and Johnson Health Tech, you can compare the effects of market volatilities on Tai Tung and Johnson Health 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 Tai Tung with a short position of Johnson Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tai Tung and Johnson Health.

Diversification Opportunities for Tai Tung and Johnson Health

-0.35

Correlation Coefficient

Tai Tung  Johnson Health

Very good diversification

The 3 months correlation between Tai and Johnson is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Tai Tung Communication and Johnson Health Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Health Tech and Tai Tung 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 Tai Tung Communication are associated (or correlated) with Johnson Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Health Tech has no effect on the direction of Tai Tung i.e., Tai Tung and Johnson Health go up and down completely randomly.

Pair Corralation between Tai Tung and Johnson Health

Assuming the 90 days trading horizon Tai Tung is expected to generate 5.28 times less return on investment than Johnson Health. But when comparing it to its historical volatility, Tai Tung Communication is 2.76 times less risky than Johnson Health. It trades about 0.1 of its potential returns per unit of risk. Johnson Health Tech is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  18,150  in Johnson Health Tech on December 5, 2024 and sell it today you would earn a total of  2,400  from holding Johnson Health Tech or generate 13.22% return on investment over 90 days.

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

Tai Tung Communication  vs.  Johnson Health Tech

Tai Tung Communication

Risk-Adjusted Performance

Very Weak

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

Johnson Health Tech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Health Tech are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Johnson Health showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tai Tung and Johnson Health

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

The idea behind Tai Tung Communication and Johnson Health Tech 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.