Correlation Between Applied Digital and JOHNSON

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

By analyzing existing cross correlation between Applied Digital and JOHNSON JOHNSON 495, you can compare the effects of market volatilities on Applied Digital and 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 Applied Digital with a short position of JOHNSON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Digital and JOHNSON.

Diversification Opportunities for Applied Digital and JOHNSON

0.31

Correlation Coefficient

Applied Digital  JOHNSON

Weak diversification

The 3 months correlation between Applied and JOHNSON is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Applied Digital and JOHNSON JOHNSON 495 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JOHNSON JOHNSON 495 and Applied Digital 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 Applied Digital are associated (or correlated) with 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 495 has no effect on the direction of Applied Digital i.e., Applied Digital and JOHNSON go up and down completely randomly.

Pair Corralation between Applied Digital and JOHNSON

Given the investment horizon of 90 days Applied Digital is expected to under-perform the JOHNSON. In addition to that, Applied Digital is 11.43 times more volatile than JOHNSON JOHNSON 495. It trades about 0.0 of its total potential returns per unit of risk. JOHNSON JOHNSON 495 is currently generating about 0.05 per unit of volatility. If you would invest  10,426  in JOHNSON JOHNSON 495 on December 2, 2024 and sell it today you would earn a total of  210.00  from holding JOHNSON JOHNSON 495 or generate 2.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Applied Digital  vs.  JOHNSON JOHNSON 495

Applied Digital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Applied Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Applied Digital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

JOHNSON JOHNSON 495

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in JOHNSON JOHNSON 495 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, JOHNSON is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Applied Digital and JOHNSON

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

The idea behind Applied Digital and JOHNSON JOHNSON 495 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.