Correlation Between Johnson Johnson and Apple

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

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

Diversification Opportunities for Johnson Johnson and Apple

-0.24

Correlation Coefficient

Johnson Johnson  Apple

Very good diversification

The 3 months correlation between Johnson and Apple is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Apple go up and down completely randomly.

Pair Corralation between Johnson Johnson and Apple

Assuming the 90 days trading horizon Johnson Johnson is expected to generate 0.73 times more return on investment than Apple. However, Johnson Johnson is 1.37 times less risky than Apple. It trades about 0.12 of its potential returns per unit of risk. Apple Inc is currently generating about -0.19 per unit of risk. If you would invest  13,746  in Johnson Johnson on December 22, 2024 and sell it today you would earn a total of  1,292  from holding Johnson Johnson or generate 9.4% return on investment over 90 days.

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

Johnson Johnson  vs.  Apple Inc

Johnson Johnson

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward-looking indicators, Johnson Johnson may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Apple Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Johnson Johnson and Apple

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

The idea behind Johnson Johnson and Apple Inc 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.