Correlation Between Johnson Johnson and Pampa Energia

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

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

Diversification Opportunities for Johnson Johnson and Pampa Energia

-0.45

Correlation Coefficient

Johnson Johnson  Pampa Energia

Very good diversification

The 3 months correlation between Johnson and Pampa is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson Co and Pampa Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pampa Energia SA and Johnson Johnson 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 Johnson Johnson Co are associated (or correlated) with Pampa Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pampa Energia SA has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Pampa Energia go up and down completely randomly.

Pair Corralation between Johnson Johnson and Pampa Energia

Assuming the 90 days trading horizon Johnson Johnson Co is expected to generate 0.45 times more return on investment than Pampa Energia. However, Johnson Johnson Co is 2.23 times less risky than Pampa Energia. It trades about 0.28 of its potential returns per unit of risk. Pampa Energia SA is currently generating about 0.01 per unit of risk. If you would invest  1,132,500  in Johnson Johnson Co on December 30, 2024 and sell it today you would earn a total of  297,500  from holding Johnson Johnson Co or generate 26.27% return on investment over 90 days.

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

Johnson Johnson Co  vs.  Pampa Energia SA

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 21 (%) 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.

Pampa Energia SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pampa Energia SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Pampa Energia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Johnson Johnson and Pampa Energia

The main advantage of trading using opposite Johnson Johnson and Pampa Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, Pampa Energia 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 Pampa Energia will offset losses from the drop in Pampa Energia's long position.

The idea behind Johnson Johnson Co and Pampa Energia SA 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.