Correlation Between Johnson Johnson and General Mills

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

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

Diversification Opportunities for Johnson Johnson and General Mills

-0.36

Correlation Coefficient

Johnson Johnson  General Mills

Very good diversification

The 3 months correlation between Johnson and General is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and General Mills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Mills 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 General Mills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Mills has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and General Mills go up and down completely randomly.

Pair Corralation between Johnson Johnson and General Mills

Assuming the 90 days trading horizon Johnson Johnson is expected to under-perform the General Mills. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 1.79 times less risky than General Mills. The stock trades about -0.32 of its potential returns per unit of risk. The General Mills is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  8,548  in General Mills on September 23, 2024 and sell it today you would earn a total of  346.00  from holding General Mills or generate 4.05% 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.  General Mills

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 comparatively stable forward-looking indicators, Johnson Johnson is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

General Mills

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in General Mills are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, General Mills unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Johnson Johnson and General Mills

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

The idea behind Johnson Johnson and General Mills 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 Anywhere module to track or share privately all of your investments from the convenience of any device.