Correlation Between Johnson Johnson and EVS Broadcast

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

By analyzing existing cross correlation between Johnson Johnson and EVS Broadcast Equipment, you can compare the effects of market volatilities on Johnson Johnson and EVS Broadcast 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 EVS Broadcast. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and EVS Broadcast.

Diversification Opportunities for Johnson Johnson and EVS Broadcast

-0.65

Correlation Coefficient

Johnson Johnson  EVS Broadcast

Excellent diversification

The 3 months correlation between Johnson and EVS is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and EVS Broadcast Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVS Broadcast Equipment 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 are associated (or correlated) with EVS Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVS Broadcast Equipment has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and EVS Broadcast go up and down completely randomly.

Pair Corralation between Johnson Johnson and EVS Broadcast

Assuming the 90 days trading horizon Johnson Johnson is expected to generate 0.58 times more return on investment than EVS Broadcast. However, Johnson Johnson is 1.73 times less risky than EVS Broadcast. It trades about 0.01 of its potential returns per unit of risk. EVS Broadcast Equipment is currently generating about 0.01 per unit of risk. If you would invest  13,572  in Johnson Johnson on October 12, 2024 and sell it today you would earn a total of  244.00  from holding Johnson Johnson or generate 1.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.47%
Values	Daily Returns

Johnson Johnson  vs.  EVS Broadcast Equipment

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 rather sound forward-looking indicators, Johnson Johnson is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

EVS Broadcast Equipment

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EVS Broadcast Equipment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, EVS Broadcast may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Johnson Johnson and EVS Broadcast

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

The idea behind Johnson Johnson and EVS Broadcast Equipment 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.