Correlation Between Johnson Opportunity and Johnson Enhanced

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

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

Diversification Opportunities for Johnson Opportunity and Johnson Enhanced

0.88

Correlation Coefficient

Johnson Opportunity  Johnson Enhanced

Very poor diversification

The 3 months correlation between Johnson and Johnson is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Opportunity S and Johnson Enhanced Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Enhanced Return and Johnson Opportunity 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 Opportunity S are associated (or correlated) with Johnson Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Enhanced Return has no effect on the direction of Johnson Opportunity i.e., Johnson Opportunity and Johnson Enhanced go up and down completely randomly.

Pair Corralation between Johnson Opportunity and Johnson Enhanced

Assuming the 90 days horizon Johnson Opportunity S is expected to under-perform the Johnson Enhanced. In addition to that, Johnson Opportunity is 1.16 times more volatile than Johnson Enhanced Return. It trades about -0.04 of its total potential returns per unit of risk. Johnson Enhanced Return is currently generating about 0.01 per unit of volatility. If you would invest  1,777  in Johnson Enhanced Return on October 27, 2024 and sell it today you would earn a total of  4.00  from holding Johnson Enhanced Return or generate 0.23% return on investment over 90 days.

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

Johnson Opportunity S  vs.  Johnson Enhanced Return

Johnson Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Johnson Enhanced Return

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Johnson Enhanced Return has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Johnson Enhanced 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 Opportunity and Johnson Enhanced

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

The idea behind Johnson Opportunity S and Johnson Enhanced Return 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.