Correlation Between Johnson Johnson and 1ST SUMMIT

Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and 1ST SUMMIT 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 1ST SUMMIT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Johnson Johnson and 1ST SUMMIT BANCORP, you can compare the effects of market volatilities on Johnson Johnson and 1ST SUMMIT 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 1ST SUMMIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and 1ST SUMMIT.

Diversification Opportunities for Johnson Johnson and 1ST SUMMIT

-0.86

Correlation Coefficient

Johnson Johnson  1ST SUMMIT

Pay attention - limited upside

The 3 months correlation between Johnson and 1ST is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and 1ST SUMMIT BANCORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1ST SUMMIT BANCORP 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 1ST SUMMIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1ST SUMMIT BANCORP has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and 1ST SUMMIT go up and down completely randomly.

Pair Corralation between Johnson Johnson and 1ST SUMMIT

Considering the 90-day investment horizon Johnson Johnson is expected to generate 1.43 times more return on investment than 1ST SUMMIT. However, Johnson Johnson is 1.43 times more volatile than 1ST SUMMIT BANCORP. It trades about 0.18 of its potential returns per unit of risk. 1ST SUMMIT BANCORP is currently generating about -0.11 per unit of risk. If you would invest  14,390  in Johnson Johnson on December 27, 2024 and sell it today you would earn a total of  1,922  from holding Johnson Johnson or generate 13.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Johnson Johnson  vs.  1ST SUMMIT BANCORP

Johnson Johnson

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson are ranked lower than 14 (%) 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.

1ST SUMMIT BANCORP

Risk-Adjusted Performance

Very Weak

Over the last 90 days 1ST SUMMIT BANCORP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, 1ST SUMMIT is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Johnson Johnson and 1ST SUMMIT

The main advantage of trading using opposite Johnson Johnson and 1ST SUMMIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, 1ST SUMMIT 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 1ST SUMMIT will offset losses from the drop in 1ST SUMMIT's long position.

The idea behind Johnson Johnson and 1ST SUMMIT BANCORP 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.