Correlation Between Johnson Johnson and RCS MediaGroup

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

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

Diversification Opportunities for Johnson Johnson and RCS MediaGroup

0.83

Correlation Coefficient

Johnson Johnson  RCS MediaGroup

Very poor diversification

The 3 months correlation between Johnson and RCS is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and RCS MediaGroup SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCS MediaGroup SpA 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 RCS MediaGroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCS MediaGroup SpA has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and RCS MediaGroup go up and down completely randomly.

Pair Corralation between Johnson Johnson and RCS MediaGroup

Assuming the 90 days trading horizon Johnson Johnson is expected to generate 2.4 times less return on investment than RCS MediaGroup. But when comparing it to its historical volatility, Johnson Johnson is 1.76 times less risky than RCS MediaGroup. It trades about 0.12 of its potential returns per unit of risk. RCS MediaGroup SpA is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  85.00  in RCS MediaGroup SpA on December 21, 2024 and sell it today you would earn a total of  19.00  from holding RCS MediaGroup SpA or generate 22.35% return on investment over 90 days.

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

Johnson Johnson  vs.  RCS MediaGroup SpA

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 uncertain forward-looking indicators, Johnson Johnson may actually be approaching a critical reversion point that can send shares even higher in April 2025.

RCS MediaGroup SpA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RCS MediaGroup SpA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady forward indicators, RCS MediaGroup reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Johnson Johnson and RCS MediaGroup

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

The idea behind Johnson Johnson and RCS MediaGroup SpA 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..