Correlation Between Johnson Johnson and SHP ETF

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

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

Diversification Opportunities for Johnson Johnson and SHP ETF

0.66

Correlation Coefficient

Johnson Johnson  SHP ETF

Poor diversification

The 3 months correlation between Johnson and SHP is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and SHP ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHP ETF Trust 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 SHP ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHP ETF Trust has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and SHP ETF go up and down completely randomly.

Pair Corralation between Johnson Johnson and SHP ETF

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the SHP ETF. In addition to that, Johnson Johnson is 2.69 times more volatile than SHP ETF Trust. It trades about -0.14 of its total potential returns per unit of risk. SHP ETF Trust is currently generating about -0.04 per unit of volatility. If you would invest  4,806  in SHP ETF Trust on September 5, 2024 and sell it today you would lose (35.00) from holding SHP ETF Trust or give up 0.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Johnson Johnson  vs.  SHP ETF Trust

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.

SHP ETF Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SHP ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, SHP ETF is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Johnson Johnson and SHP ETF

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

The idea behind Johnson Johnson and SHP ETF Trust 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.