Correlation Between Johnson Johnson and Boyd Gaming

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

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

Diversification Opportunities for Johnson Johnson and Boyd Gaming

0.59

Correlation Coefficient

Johnson Johnson  Boyd Gaming

Very weak diversification

The 3 months correlation between Johnson and Boyd is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Boyd Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boyd Gaming 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 Boyd Gaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boyd Gaming has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Boyd Gaming go up and down completely randomly.

Pair Corralation between Johnson Johnson and Boyd Gaming

Considering the 90-day investment horizon Johnson Johnson is expected to generate 0.97 times more return on investment than Boyd Gaming. However, Johnson Johnson is 1.03 times less risky than Boyd Gaming. It trades about 0.12 of its potential returns per unit of risk. Boyd Gaming is currently generating about 0.04 per unit of risk. If you would invest  15,378  in Johnson Johnson on November 28, 2024 and sell it today you would earn a total of  1,231  from holding Johnson Johnson or generate 8.0% 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.  Boyd Gaming

Johnson Johnson

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Johnson Johnson may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Boyd Gaming

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Boyd Gaming are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Boyd Gaming is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Johnson Johnson and Boyd Gaming

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

The idea behind Johnson Johnson and Boyd Gaming 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.