Correlation Between Johnson Johnson and American Green

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

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

Diversification Opportunities for Johnson Johnson and American Green

-0.33

Correlation Coefficient

Johnson Johnson  American Green

Very good diversification

The 3 months correlation between Johnson and American is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and American Green in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Green 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 American Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Green has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and American Green go up and down completely randomly.

Pair Corralation between Johnson Johnson and American Green

Considering the 90-day investment horizon Johnson Johnson is expected to generate 1.55 times less return on investment than American Green. But when comparing it to its historical volatility, Johnson Johnson is 12.22 times less risky than American Green. It trades about 0.3 of its potential returns per unit of risk. American Green is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.05  in American Green on December 2, 2024 and sell it today you would lose (0.01) from holding American Green or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

Johnson Johnson  vs.  American Green

Johnson Johnson

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Johnson Johnson may actually be approaching a critical reversion point that can send shares even higher in April 2025.

American Green

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Green are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental drivers, American Green sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Johnson Johnson and American Green

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

The idea behind Johnson Johnson and American Green 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.