Correlation Between HP and JOHNSON

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

By analyzing existing cross correlation between HP Inc and JOHNSON JOHNSON 585, you can compare the effects of market volatilities on HP 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 HP with a short position of JOHNSON. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and JOHNSON.

Diversification Opportunities for HP and JOHNSON

0.41

Correlation Coefficient

HP  JOHNSON

Very weak diversification

The 3 months correlation between HP and JOHNSON is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and JOHNSON JOHNSON 585 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JOHNSON JOHNSON 585 and HP 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 HP Inc 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 585 has no effect on the direction of HP i.e., HP and JOHNSON go up and down completely randomly.

Pair Corralation between HP and JOHNSON

Considering the 90-day investment horizon HP Inc is expected to under-perform the JOHNSON. In addition to that, HP is 1.14 times more volatile than JOHNSON JOHNSON 585. It trades about -0.16 of its total potential returns per unit of risk. JOHNSON JOHNSON 585 is currently generating about -0.03 per unit of volatility. If you would invest  11,077  in JOHNSON JOHNSON 585 on December 2, 2024 and sell it today you would lose (294.00) from holding JOHNSON JOHNSON 585 or give up 2.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

HP Inc  vs.  JOHNSON JOHNSON 585

HP Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days HP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

JOHNSON JOHNSON 585

Risk-Adjusted Performance

Modest

Over the last 90 days JOHNSON JOHNSON 585 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, JOHNSON is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HP and JOHNSON

The main advantage of trading using opposite HP and JOHNSON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP 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 HP Inc and JOHNSON JOHNSON 585 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.