Correlation Between Xtrackers LevDAX and Johnson Johnson

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

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

Diversification Opportunities for Xtrackers LevDAX and Johnson Johnson

-0.48

Correlation Coefficient

Xtrackers LevDAX  Johnson Johnson

Very good diversification

The 3 months correlation between Xtrackers and Johnson is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers LevDAX and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Xtrackers LevDAX 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 Xtrackers LevDAX 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 Xtrackers LevDAX i.e., Xtrackers LevDAX and Johnson Johnson go up and down completely randomly.

Pair Corralation between Xtrackers LevDAX and Johnson Johnson

Assuming the 90 days trading horizon Xtrackers LevDAX is expected to under-perform the Johnson Johnson. In addition to that, Xtrackers LevDAX is 1.17 times more volatile than Johnson Johnson. It trades about -0.37 of its total potential returns per unit of risk. Johnson Johnson is currently generating about -0.15 per unit of volatility. If you would invest  14,212  in Johnson Johnson on October 8, 2024 and sell it today you would lose (230.00) from holding Johnson Johnson or give up 1.62% of portfolio value over 90 days.

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

Xtrackers LevDAX  vs.  Johnson Johnson

Xtrackers LevDAX

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers LevDAX are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Xtrackers LevDAX may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 Xtrackers LevDAX and Johnson Johnson

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

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.