Correlation Between Butterfly Network and Johnson Outdoors

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Can any of the company-specific risk be diversified away by investing in both Butterfly Network 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 Butterfly Network and Johnson Outdoors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Butterfly Network and Johnson Outdoors, you can compare the effects of market volatilities on Butterfly Network 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 Butterfly Network with a short position of Johnson Outdoors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Butterfly Network and Johnson Outdoors.

Diversification Opportunities for Butterfly Network and Johnson Outdoors

-0.03
  Correlation Coefficient

Good diversification

The 3 months correlation between Butterfly and Johnson is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Butterfly Network and Johnson Outdoors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Outdoors and Butterfly Network 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 Butterfly Network 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 Butterfly Network i.e., Butterfly Network and Johnson Outdoors go up and down completely randomly.

Pair Corralation between Butterfly Network and Johnson Outdoors

Given the investment horizon of 90 days Butterfly Network is expected to under-perform the Johnson Outdoors. In addition to that, Butterfly Network is 2.86 times more volatile than Johnson Outdoors. It trades about -0.01 of its total potential returns per unit of risk. Johnson Outdoors is currently generating about -0.02 per unit of volatility. If you would invest  6,304  in Johnson Outdoors on December 29, 2023 and sell it today you would lose (1,915) from holding Johnson Outdoors or give up 30.38% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Butterfly Network  vs.  Johnson Outdoors

 Performance 
       Timeline  
Butterfly Network 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Butterfly Network are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent essential indicators, Butterfly Network showed solid returns over the last few months and may actually be approaching a breakup point.
Johnson Outdoors 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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 conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Butterfly Network and Johnson Outdoors Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Butterfly Network and Johnson Outdoors

The main advantage of trading using opposite Butterfly Network and Johnson Outdoors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Butterfly Network 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 Butterfly Network 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.
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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