Correlation Between Johnson Johnson and GBX International

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

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

Diversification Opportunities for Johnson Johnson and GBX International

-0.59

Correlation Coefficient

Johnson Johnson  GBX International

Excellent diversification

The 3 months correlation between Johnson and GBX is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and GBX International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GBX International 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 GBX International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GBX International has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and GBX International go up and down completely randomly.

Pair Corralation between Johnson Johnson and GBX International

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the GBX International. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 93.2 times less risky than GBX International. The stock trades about -0.02 of its potential returns per unit of risk. The GBX International Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  8.00  in GBX International Group on October 4, 2024 and sell it today you would lose (7.98) from holding GBX International Group or give up 99.75% of portfolio value over 90 days.

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

Johnson Johnson  vs.  GBX International Group

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.

GBX International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GBX International Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, GBX International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Johnson Johnson and GBX International

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

The idea behind Johnson Johnson and GBX International Group 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.