Correlation Between Johnson Johnson and Context Therapeutics

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

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

Diversification Opportunities for Johnson Johnson and Context Therapeutics

0.67

Correlation Coefficient

Johnson Johnson  Context Therapeutics

Poor diversification

The 3 months correlation between Johnson and Context is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Context Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Context Therapeutics 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 Context Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Context Therapeutics has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Context Therapeutics go up and down completely randomly.

Pair Corralation between Johnson Johnson and Context Therapeutics

Considering the 90-day investment horizon Johnson Johnson is expected to generate 0.17 times more return on investment than Context Therapeutics. However, Johnson Johnson is 5.95 times less risky than Context Therapeutics. It trades about -0.27 of its potential returns per unit of risk. Context Therapeutics is currently generating about -0.1 per unit of risk. If you would invest  16,483  in Johnson Johnson on September 18, 2024 and sell it today you would lose (2,098) from holding Johnson Johnson or give up 12.73% of portfolio value over 90 days.

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

Johnson Johnson  vs.  Context Therapeutics

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 uncertain performance in the last few months, the Stock's basic indicators remain relatively steady which may send shares a bit higher in January 2025. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Context Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Context Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Johnson Johnson and Context Therapeutics

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

The idea behind Johnson Johnson and Context Therapeutics 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.