Correlation Between Johnson Johnson and Deutsche Equity

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

By analyzing existing cross correlation between Johnson Johnson and Deutsche Equity 500, you can compare the effects of market volatilities on Johnson Johnson and Deutsche Equity 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 Deutsche Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and Deutsche Equity.

Diversification Opportunities for Johnson Johnson and Deutsche Equity

0.51

Correlation Coefficient

Johnson Johnson  Deutsche Equity

Very weak diversification

The 3 months correlation between Johnson and Deutsche is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Deutsche Equity 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Equity 500 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 Deutsche Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Equity 500 has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Deutsche Equity go up and down completely randomly.

Pair Corralation between Johnson Johnson and Deutsche Equity

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the Deutsche Equity. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 1.27 times less risky than Deutsche Equity. The stock trades about -0.03 of its potential returns per unit of risk. The Deutsche Equity 500 is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  14,857  in Deutsche Equity 500 on October 7, 2024 and sell it today you would earn a total of  1,108  from holding Deutsche Equity 500 or generate 7.46% return on investment over 90 days.

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

Johnson Johnson  vs.  Deutsche Equity 500

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.

Deutsche Equity 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Equity 500 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Johnson Johnson and Deutsche Equity

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

The idea behind Johnson Johnson and Deutsche Equity 500 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.