Correlation Between Lyxor 1 and Johnson Johnson

Can any of the company-specific risk be diversified away by investing in both Lyxor 1 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 Lyxor 1 and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lyxor 1 and Johnson Johnson, you can compare the effects of market volatilities on Lyxor 1 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 Lyxor 1 with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor 1 and Johnson Johnson.

Diversification Opportunities for Lyxor 1 and Johnson Johnson

-0.35

Correlation Coefficient

Lyxor 1  Johnson Johnson

Very good diversification

The 3 months correlation between Lyxor and Johnson is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Lyxor 1 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 Lyxor 1 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 Lyxor 1 i.e., Lyxor 1 and Johnson Johnson go up and down completely randomly.

Pair Corralation between Lyxor 1 and Johnson Johnson

Assuming the 90 days trading horizon Lyxor 1 is expected to under-perform the Johnson Johnson. But the etf apears to be less risky and, when comparing its historical volatility, Lyxor 1 is 1.06 times less risky than Johnson Johnson. The etf trades about -0.33 of its potential returns per unit of risk. The Johnson Johnson is currently generating about -0.15 of returns per unit of risk over similar time horizon. 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Lyxor 1   vs.  Johnson Johnson

Lyxor 1

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Lyxor 1 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 Lyxor 1 and Johnson Johnson

The main advantage of trading using opposite Lyxor 1 and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor 1 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 Lyxor 1 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.