Correlation Between Johnson Johnson and Caspian Services

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

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

Diversification Opportunities for Johnson Johnson and Caspian Services

-0.6

Correlation Coefficient

Johnson Johnson  Caspian Services

Excellent diversification

The 3 months correlation between Johnson and Caspian is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Caspian Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caspian Services 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 Caspian Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caspian Services has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Caspian Services go up and down completely randomly.

Pair Corralation between Johnson Johnson and Caspian Services

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the Caspian Services. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 45.91 times less risky than Caspian Services. The stock trades about -0.02 of its potential returns per unit of risk. The Caspian Services is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.11  in Caspian Services on October 4, 2024 and sell it today you would earn a total of  0.29  from holding Caspian Services or generate 263.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Johnson Johnson  vs.  Caspian Services

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.

Caspian Services

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Caspian Services are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Caspian Services showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Johnson Johnson and Caspian Services

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

The idea behind Johnson Johnson and Caspian Services 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.