Correlation Between Preferred Bank and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both Preferred Bank and Johnson Johnson 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 Preferred Bank and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Preferred Bank and Johnson Johnson, you can compare the effects of market volatilities on Preferred Bank and Johnson Johnson 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 Preferred Bank with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Preferred Bank and Johnson Johnson.
Diversification Opportunities for Preferred Bank and Johnson Johnson
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Preferred and Johnson is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Preferred Bank and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Preferred Bank 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 Preferred Bank are associated (or correlated) with Johnson Johnson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Johnson has no effect on the direction of Preferred Bank i.e., Preferred Bank and Johnson Johnson go up and down completely randomly.
Pair Corralation between Preferred Bank and Johnson Johnson
Assuming the 90 days horizon Preferred Bank is expected to under-perform the Johnson Johnson. In addition to that, Preferred Bank is 1.28 times more volatile than Johnson Johnson. It trades about -0.05 of its total potential returns per unit of risk. Johnson Johnson is currently generating about 0.12 per unit of volatility. If you would invest 13,851 in Johnson Johnson on December 24, 2024 and sell it today you would earn a total of 1,251 from holding Johnson Johnson or generate 9.03% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Preferred Bank vs. Johnson Johnson
Performance |
Timeline |
Preferred Bank |
Johnson Johnson |
Preferred Bank and Johnson Johnson Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Preferred Bank and Johnson Johnson
The main advantage of trading using opposite Preferred Bank and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Preferred Bank position performs unexpectedly, Johnson Johnson 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 Johnson will offset losses from the drop in Johnson Johnson's long position.Preferred Bank vs. POSBO UNSPADRS20YC1 | Preferred Bank vs. Postal Savings Bank | Preferred Bank vs. Truist Financial | Preferred Bank vs. OVERSEA CHINUNSPADR2 |
Johnson Johnson vs. High Liner Foods | Johnson Johnson vs. ANTA Sports Products | Johnson Johnson vs. COFCO Joycome Foods | Johnson Johnson vs. Moneysupermarket Group PLC |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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