Correlation Between Johnson Johnson and Ceylon Graphite

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

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

Diversification Opportunities for Johnson Johnson and Ceylon Graphite

0.54

Correlation Coefficient

Johnson Johnson  Ceylon Graphite

Very weak diversification

The 3 months correlation between Johnson and Ceylon is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Ceylon Graphite Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceylon Graphite Corp 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 Ceylon Graphite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceylon Graphite Corp has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Ceylon Graphite go up and down completely randomly.

Pair Corralation between Johnson Johnson and Ceylon Graphite

Considering the 90-day investment horizon Johnson Johnson is expected to generate 18.0 times less return on investment than Ceylon Graphite. But when comparing it to its historical volatility, Johnson Johnson is 26.57 times less risky than Ceylon Graphite. It trades about 0.21 of its potential returns per unit of risk. Ceylon Graphite Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1.11  in Ceylon Graphite Corp on December 29, 2024 and sell it today you would lose (0.31) from holding Ceylon Graphite Corp or give up 27.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Johnson Johnson  vs.  Ceylon Graphite Corp

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.

Ceylon Graphite Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ceylon Graphite Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ceylon Graphite reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Johnson Johnson and Ceylon Graphite

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

The idea behind Johnson Johnson and Ceylon Graphite Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.