Correlation Between H2O Retailing and Johnson Electric

Can any of the company-specific risk be diversified away by investing in both H2O Retailing and Johnson Electric 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 H2O Retailing and Johnson Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between H2O Retailing and Johnson Electric Holdings, you can compare the effects of market volatilities on H2O Retailing and Johnson Electric 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 H2O Retailing with a short position of Johnson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of H2O Retailing and Johnson Electric.

Diversification Opportunities for H2O Retailing and Johnson Electric

0.36

Correlation Coefficient

H2O Retailing  Johnson Electric

Weak diversification

The 3 months correlation between H2O and Johnson is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding H2O Retailing and Johnson Electric Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Electric Holdings and H2O Retailing 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 H2O Retailing are associated (or correlated) with Johnson Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Electric Holdings has no effect on the direction of H2O Retailing i.e., H2O Retailing and Johnson Electric go up and down completely randomly.

Pair Corralation between H2O Retailing and Johnson Electric

Assuming the 90 days horizon H2O Retailing is expected to generate 8.68 times less return on investment than Johnson Electric. But when comparing it to its historical volatility, H2O Retailing is 2.43 times less risky than Johnson Electric. It trades about 0.05 of its potential returns per unit of risk. Johnson Electric Holdings is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  133.00  in Johnson Electric Holdings on December 20, 2024 and sell it today you would earn a total of  67.00  from holding Johnson Electric Holdings or generate 50.38% return on investment over 90 days.

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

H2O Retailing  vs.  Johnson Electric Holdings

H2O Retailing

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in H2O Retailing are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, H2O Retailing is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Johnson Electric Holdings

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Electric Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Johnson Electric reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with H2O Retailing and Johnson Electric

The main advantage of trading using opposite H2O Retailing and Johnson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H2O Retailing position performs unexpectedly, Johnson Electric 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 Electric will offset losses from the drop in Johnson Electric's long position.

The idea behind H2O Retailing and Johnson Electric Holdings 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.