Correlation Between Central Puerto and Johnson Johnson

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

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

Diversification Opportunities for Central Puerto and Johnson Johnson

-0.42

Correlation Coefficient

Central Puerto  Johnson Johnson

Very good diversification

The 3 months correlation between Central and Johnson is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Central Puerto SA and Johnson Johnson Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Central Puerto 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 Central Puerto SA 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 Central Puerto i.e., Central Puerto and Johnson Johnson go up and down completely randomly.

Pair Corralation between Central Puerto and Johnson Johnson

Assuming the 90 days trading horizon Central Puerto SA is expected to under-perform the Johnson Johnson. In addition to that, Central Puerto is 2.4 times more volatile than Johnson Johnson Co. It trades about -0.02 of its total potential returns per unit of risk. Johnson Johnson Co is currently generating about 0.25 per unit of volatility. If you would invest  1,080,000  in Johnson Johnson Co on December 5, 2024 and sell it today you would earn a total of  255,000  from holding Johnson Johnson Co or generate 23.61% return on investment over 90 days.

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

Central Puerto SA  vs.  Johnson Johnson Co

Central Puerto SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central Puerto SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Central Puerto is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Johnson Johnson

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson Co are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward-looking indicators, Johnson Johnson sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Central Puerto and Johnson Johnson

The main advantage of trading using opposite Central Puerto and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Puerto 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 Central Puerto SA and Johnson Johnson Co 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.