Correlation Between Johnson Outdoors and Solo Brands

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

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

Diversification Opportunities for Johnson Outdoors and Solo Brands

-0.22

Correlation Coefficient

Johnson Outdoors  Solo Brands

Very good diversification

The 3 months correlation between Johnson and Solo is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Outdoors and Solo Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solo Brands and Johnson Outdoors 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 Outdoors are associated (or correlated) with Solo Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solo Brands has no effect on the direction of Johnson Outdoors i.e., Johnson Outdoors and Solo Brands go up and down completely randomly.

Pair Corralation between Johnson Outdoors and Solo Brands

Given the investment horizon of 90 days Johnson Outdoors is expected to generate 0.39 times more return on investment than Solo Brands. However, Johnson Outdoors is 2.57 times less risky than Solo Brands. It trades about 0.03 of its potential returns per unit of risk. Solo Brands is currently generating about -0.04 per unit of risk. If you would invest  3,251  in Johnson Outdoors on October 7, 2024 and sell it today you would earn a total of  174.00  from holding Johnson Outdoors or generate 5.35% return on investment over 90 days.

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

Johnson Outdoors  vs.  Solo Brands

Johnson Outdoors

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Outdoors are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Johnson Outdoors is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Solo Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solo Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Johnson Outdoors and Solo Brands

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

The idea behind Johnson Outdoors and Solo Brands 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.