Correlation Between Johnson Johnson and Dimensional Equity

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

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

Diversification Opportunities for Johnson Johnson and Dimensional Equity

-0.55

Correlation Coefficient

Johnson Johnson  Dimensional Equity

Excellent diversification

The 3 months correlation between Johnson and Dimensional is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Dimensional Equity ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Equity ETF 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 Dimensional Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Equity ETF has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Dimensional Equity go up and down completely randomly.

Pair Corralation between Johnson Johnson and Dimensional Equity

Considering the 90-day investment horizon Johnson Johnson is expected to generate 1.08 times more return on investment than Dimensional Equity. However, Johnson Johnson is 1.08 times more volatile than Dimensional Equity ETF. It trades about 0.21 of its potential returns per unit of risk. Dimensional Equity ETF is currently generating about -0.09 per unit of risk. If you would invest  14,220  in Johnson Johnson on December 30, 2024 and sell it today you would earn a total of  2,151  from holding Johnson Johnson or generate 15.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Johnson Johnson  vs.  Dimensional Equity ETF

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 conflicting basic indicators, Johnson Johnson revealed solid returns over the last few months and may actually be approaching a breakup point.

Dimensional Equity ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dimensional Equity ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Dimensional Equity is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Johnson Johnson and Dimensional Equity

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

The idea behind Johnson Johnson and Dimensional Equity ETF 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.