Correlation Between Air Transport and Johnson Johnson

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

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

Diversification Opportunities for Air Transport and Johnson Johnson

-0.56

Correlation Coefficient

Air Transport  Johnson Johnson

Excellent diversification

The 3 months correlation between Air and Johnson is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Air Transport 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 Air Transport Services 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 Air Transport i.e., Air Transport and Johnson Johnson go up and down completely randomly.

Pair Corralation between Air Transport and Johnson Johnson

Assuming the 90 days horizon Air Transport Services is expected to generate 0.64 times more return on investment than Johnson Johnson. However, Air Transport Services is 1.56 times less risky than Johnson Johnson. It trades about 0.25 of its potential returns per unit of risk. Johnson Johnson is currently generating about -0.24 per unit of risk. If you would invest  2,080  in Air Transport Services on October 9, 2024 and sell it today you would earn a total of  40.00  from holding Air Transport Services or generate 1.92% return on investment over 90 days.

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

Air Transport Services  vs.  Johnson Johnson

Air Transport Services

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Air Transport reported solid returns over the last few months and may actually be approaching a breakup point.

Johnson Johnson

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Johnson Johnson has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking indicators, Johnson Johnson is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Air Transport and Johnson Johnson

The main advantage of trading using opposite Air Transport and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport 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.

The idea behind Air Transport Services and Johnson Johnson 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.