Correlation Between Johnson Johnson and Champions Oncology

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

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

Diversification Opportunities for Johnson Johnson and Champions Oncology

-0.79

Correlation Coefficient

Johnson Johnson  Champions Oncology

Pay attention - limited upside

The 3 months correlation between Johnson and Champions is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Champions Oncology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champions Oncology 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 Champions Oncology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champions Oncology has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Champions Oncology go up and down completely randomly.

Pair Corralation between Johnson Johnson and Champions Oncology

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the Champions Oncology. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 5.31 times less risky than Champions Oncology. The stock trades about -0.02 of its potential returns per unit of risk. The Champions Oncology is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  505.00  in Champions Oncology on October 20, 2024 and sell it today you would earn a total of  473.00  from holding Champions Oncology or generate 93.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.21%
Values	Daily Returns

Johnson Johnson  vs.  Champions Oncology

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.

Champions Oncology

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Champions Oncology are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental drivers, Champions Oncology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Johnson Johnson and Champions Oncology

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

The idea behind Johnson Johnson and Champions Oncology 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.