Correlation Between Johnson Johnson and VanEck Indonesia

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

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

Diversification Opportunities for Johnson Johnson and VanEck Indonesia

0.88

Correlation Coefficient

Johnson Johnson  VanEck Indonesia

Very poor diversification

The 3 months correlation between Johnson and VanEck is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and VanEck Indonesia Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Indonesia Index 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 VanEck Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Indonesia Index has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and VanEck Indonesia go up and down completely randomly.

Pair Corralation between Johnson Johnson and VanEck Indonesia

Considering the 90-day investment horizon Johnson Johnson is expected to generate 1.3 times less return on investment than VanEck Indonesia. In addition to that, Johnson Johnson is 1.01 times more volatile than VanEck Indonesia Index. It trades about 0.09 of its total potential returns per unit of risk. VanEck Indonesia Index is currently generating about 0.12 per unit of volatility. If you would invest  1,450  in VanEck Indonesia Index on October 21, 2024 and sell it today you would earn a total of  34.00  from holding VanEck Indonesia Index or generate 2.34% return on investment over 90 days.

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

Johnson Johnson  vs.  VanEck Indonesia Index

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.

VanEck Indonesia Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Indonesia Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Etf's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with Johnson Johnson and VanEck Indonesia

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

The idea behind Johnson Johnson and VanEck Indonesia Index 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.

Check out your portfolio center.

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.