Correlation Between Johnson Equity and Johnson Core

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

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

Diversification Opportunities for Johnson Equity and Johnson Core

-0.1

Correlation Coefficient

Johnson Equity  Johnson Core

Good diversification

The 3 months correlation between Johnson and Johnson is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Equity Income and Johnson Core Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Core Plus and Johnson Equity 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 Equity Income are associated (or correlated) with Johnson Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Core Plus has no effect on the direction of Johnson Equity i.e., Johnson Equity and Johnson Core go up and down completely randomly.

Pair Corralation between Johnson Equity and Johnson Core

Assuming the 90 days horizon Johnson Equity Income is expected to under-perform the Johnson Core. In addition to that, Johnson Equity is 3.25 times more volatile than Johnson Core Plus. It trades about -0.08 of its total potential returns per unit of risk. Johnson Core Plus is currently generating about 0.13 per unit of volatility. If you would invest  1,249  in Johnson Core Plus on December 20, 2024 and sell it today you would earn a total of  30.00  from holding Johnson Core Plus or generate 2.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Johnson Equity Income  vs.  Johnson Core Plus

Johnson Equity Income

Risk-Adjusted Performance

Very Weak

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

Johnson Core Plus

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Core Plus are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. 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.

Pair Trading with Johnson Equity and Johnson Core

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

The idea behind Johnson Equity Income and Johnson Core Plus 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.