Correlation Between Johnson Core and Johnson International

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

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

Diversification Opportunities for Johnson Core and Johnson International

0.81

Correlation Coefficient

Johnson Core  Johnson International

Very poor diversification

The 3 months correlation between Johnson and Johnson is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Core Plus and Johnson International Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson International and Johnson Core 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 Core Plus are associated (or correlated) with Johnson International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson International has no effect on the direction of Johnson Core i.e., Johnson Core and Johnson International go up and down completely randomly.

Pair Corralation between Johnson Core and Johnson International

Assuming the 90 days horizon Johnson Core Plus is expected to generate 0.36 times more return on investment than Johnson International. However, Johnson Core Plus is 2.76 times less risky than Johnson International. It trades about 0.06 of its potential returns per unit of risk. Johnson International Fund is currently generating about -0.01 per unit of risk. If you would invest  1,206  in Johnson Core Plus on October 12, 2024 and sell it today you would earn a total of  45.00  from holding Johnson Core Plus or generate 3.73% return on investment over 90 days.

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

Johnson Core Plus  vs.  Johnson International Fund

Johnson Core Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Johnson Core Plus has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Johnson Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Johnson International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Johnson International Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Johnson Core and Johnson International

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

The idea behind Johnson Core Plus and Johnson International Fund 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.