Correlation Between Johnson Johnson and Givaudan

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

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

Diversification Opportunities for Johnson Johnson and Givaudan

0.75

Correlation Coefficient

Johnson Johnson  Givaudan

Poor diversification

The 3 months correlation between Johnson and Givaudan is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Givaudan SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Givaudan SA 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 Givaudan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Givaudan SA has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Givaudan go up and down completely randomly.

Pair Corralation between Johnson Johnson and Givaudan

Considering the 90-day investment horizon Johnson Johnson is expected to generate 0.36 times more return on investment than Givaudan. However, Johnson Johnson is 2.74 times less risky than Givaudan. It trades about -0.14 of its potential returns per unit of risk. Givaudan SA is currently generating about -0.11 per unit of risk. If you would invest  16,368  in Johnson Johnson on September 5, 2024 and sell it today you would lose (1,132) from holding Johnson Johnson or give up 6.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Johnson Johnson  vs.  Givaudan SA

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 weak 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.

Givaudan SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Givaudan SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Johnson Johnson and Givaudan

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

The idea behind Johnson Johnson and Givaudan SA 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.