Correlation Between Johnson Johnson and Allied Motion

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

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

Diversification Opportunities for Johnson Johnson and Allied Motion

-0.58

Correlation Coefficient

Johnson Johnson  Allied Motion

Excellent diversification

The 3 months correlation between Johnson and Allied is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Allied Motion Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Motion Techno 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 Allied Motion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Motion Techno has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Allied Motion go up and down completely randomly.

Pair Corralation between Johnson Johnson and Allied Motion

If you would invest  3,917  in Allied Motion Technologies on September 2, 2024 and sell it today you would earn a total of  0.00  from holding Allied Motion Technologies or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Johnson Johnson  vs.  Allied Motion Technologies

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. Even with latest weak performance, the Stock's basic indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Allied Motion Techno

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allied Motion Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Allied Motion is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Johnson Johnson and Allied Motion

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

The idea behind Johnson Johnson and Allied Motion Technologies 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.