Correlation Between Johnson Johnson and Azure Power

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

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

Diversification Opportunities for Johnson Johnson and Azure Power

0.64

Correlation Coefficient

Johnson Johnson  Azure Power

Poor diversification

The 3 months correlation between Johnson and Azure is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Azure Power Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azure Power Global 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 Azure Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azure Power Global has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Azure Power go up and down completely randomly.

Pair Corralation between Johnson Johnson and Azure Power

If you would invest  34.00  in Azure Power Global on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Azure Power Global or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Johnson Johnson  vs.  Azure Power Global

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 conflicting 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.

Azure Power Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Azure Power Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Azure Power is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Johnson Johnson and Azure Power

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

The idea behind Johnson Johnson and Azure Power Global 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.