Correlation Between Johnson Johnson and ProShares Hedge

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

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

Diversification Opportunities for Johnson Johnson and ProShares Hedge

-0.77

Correlation Coefficient

Johnson Johnson  ProShares Hedge

Pay attention - limited upside

The 3 months correlation between Johnson and ProShares is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and ProShares Hedge Replication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Hedge Repl 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 ProShares Hedge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Hedge Repl has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and ProShares Hedge go up and down completely randomly.

Pair Corralation between Johnson Johnson and ProShares Hedge

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the ProShares Hedge. In addition to that, Johnson Johnson is 3.1 times more volatile than ProShares Hedge Replication. It trades about -0.01 of its total potential returns per unit of risk. ProShares Hedge Replication is currently generating about 0.08 per unit of volatility. If you would invest  4,431  in ProShares Hedge Replication on September 5, 2024 and sell it today you would earn a total of  623.00  from holding ProShares Hedge Replication or generate 14.06% return on investment over 90 days.

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

Johnson Johnson  vs.  ProShares Hedge Replication

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.

ProShares Hedge Repl

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Hedge Replication are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, ProShares Hedge is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Johnson Johnson and ProShares Hedge

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

The idea behind Johnson Johnson and ProShares Hedge Replication 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.