Correlation Between OneSpaWorld Holdings and Johnson Outdoors

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

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

Diversification Opportunities for OneSpaWorld Holdings and Johnson Outdoors

-0.57

Correlation Coefficient

OneSpaWorld Holdings  Johnson Outdoors

Excellent diversification

The 3 months correlation between OneSpaWorld and Johnson is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding OneSpaWorld Holdings and Johnson Outdoors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Outdoors and OneSpaWorld Holdings 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 OneSpaWorld Holdings are associated (or correlated) with Johnson Outdoors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Outdoors has no effect on the direction of OneSpaWorld Holdings i.e., OneSpaWorld Holdings and Johnson Outdoors go up and down completely randomly.

Pair Corralation between OneSpaWorld Holdings and Johnson Outdoors

Considering the 90-day investment horizon OneSpaWorld Holdings is expected to generate 0.94 times more return on investment than Johnson Outdoors. However, OneSpaWorld Holdings is 1.06 times less risky than Johnson Outdoors. It trades about 0.18 of its potential returns per unit of risk. Johnson Outdoors is currently generating about -0.05 per unit of risk. If you would invest  1,584  in OneSpaWorld Holdings on August 30, 2024 and sell it today you would earn a total of  316.00  from holding OneSpaWorld Holdings or generate 19.95% return on investment over 90 days.

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

OneSpaWorld Holdings  vs.  Johnson Outdoors

OneSpaWorld Holdings

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days OneSpaWorld Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, OneSpaWorld Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Johnson Outdoors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Johnson Outdoors has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with OneSpaWorld Holdings and Johnson Outdoors

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

The idea behind OneSpaWorld Holdings and Johnson Outdoors 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.