Correlation Between Johnson Johnson and Dyne Therapeutics

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

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

Diversification Opportunities for Johnson Johnson and Dyne Therapeutics

0.9

Correlation Coefficient

Johnson Johnson  Dyne Therapeutics

Almost no diversification

The 3 months correlation between Johnson and Dyne is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Dyne Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dyne Therapeutics 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 Dyne Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dyne Therapeutics has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Dyne Therapeutics go up and down completely randomly.

Pair Corralation between Johnson Johnson and Dyne Therapeutics

Considering the 90-day investment horizon Johnson Johnson is expected to generate 0.37 times more return on investment than Dyne Therapeutics. However, Johnson Johnson is 2.74 times less risky than Dyne Therapeutics. It trades about -0.2 of its potential returns per unit of risk. Dyne Therapeutics is currently generating about -0.31 per unit of risk. If you would invest  14,923  in Johnson Johnson on October 11, 2024 and sell it today you would lose (696.00) from holding Johnson Johnson or give up 4.66% of portfolio value over 90 days.

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

Johnson Johnson  vs.  Dyne Therapeutics

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.

Dyne Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dyne Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Johnson Johnson and Dyne Therapeutics

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

The idea behind Johnson Johnson and Dyne Therapeutics 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.