Correlation Between Johnson Johnson and Buffalo Emerging

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

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

Diversification Opportunities for Johnson Johnson and Buffalo Emerging

-0.74

Correlation Coefficient

Johnson Johnson  Buffalo Emerging

Pay attention - limited upside

The 3 months correlation between Johnson and Buffalo is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Buffalo Emerging Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buffalo Emerging Opp 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 Buffalo Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buffalo Emerging Opp has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Buffalo Emerging go up and down completely randomly.

Pair Corralation between Johnson Johnson and Buffalo Emerging

Considering the 90-day investment horizon Johnson Johnson is expected to generate 1.1 times more return on investment than Buffalo Emerging. However, Johnson Johnson is 1.1 times more volatile than Buffalo Emerging Opportunities. It trades about 0.21 of its potential returns per unit of risk. Buffalo Emerging Opportunities is currently generating about -0.12 per unit of risk. If you would invest  14,220  in Johnson Johnson on December 29, 2024 and sell it today you would earn a total of  2,093  from holding Johnson Johnson or generate 14.72% return on investment over 90 days.

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

Johnson Johnson  vs.  Buffalo Emerging Opportunities

Johnson Johnson

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Johnson Johnson revealed solid returns over the last few months and may actually be approaching a breakup point.

Buffalo Emerging Opp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Buffalo Emerging Opportunities 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 Buffalo Emerging

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

The idea behind Johnson Johnson and Buffalo Emerging Opportunities 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.