Correlation Between Johnson Johnson and FT Cboe

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

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

Diversification Opportunities for Johnson Johnson and FT Cboe

-0.36

Correlation Coefficient

Johnson Johnson  FT Cboe

Very good diversification

The 3 months correlation between Johnson and DJUN is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and FT Cboe Vest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Cboe Vest 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 FT Cboe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Cboe Vest has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and FT Cboe go up and down completely randomly.

Pair Corralation between Johnson Johnson and FT Cboe

Considering the 90-day investment horizon Johnson Johnson is expected to generate 2.56 times less return on investment than FT Cboe. In addition to that, Johnson Johnson is 2.17 times more volatile than FT Cboe Vest. It trades about 0.02 of its total potential returns per unit of risk. FT Cboe Vest is currently generating about 0.1 per unit of volatility. If you would invest  3,414  in FT Cboe Vest on December 28, 2024 and sell it today you would earn a total of  832.41  from holding FT Cboe Vest or generate 24.38% return on investment over 90 days.

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

Johnson Johnson  vs.  FT Cboe Vest

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.

FT Cboe Vest

Risk-Adjusted Performance

Very Weak

Over the last 90 days FT Cboe Vest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, FT Cboe is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Johnson Johnson and FT Cboe

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

The idea behind Johnson Johnson and FT Cboe Vest 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.

Check out your portfolio center.

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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.