Correlation Between Johnson Johnson and Internet Infinity

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

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

Diversification Opportunities for Johnson Johnson and Internet Infinity

-0.65

Correlation Coefficient

Johnson Johnson  Internet Infinity

Excellent diversification

The 3 months correlation between Johnson and Internet is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Internet Infinity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Internet Infinity 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 Internet Infinity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Internet Infinity has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Internet Infinity go up and down completely randomly.

Pair Corralation between Johnson Johnson and Internet Infinity

Considering the 90-day investment horizon Johnson Johnson is expected to generate 0.12 times more return on investment than Internet Infinity. However, Johnson Johnson is 8.48 times less risky than Internet Infinity. It trades about 0.19 of its potential returns per unit of risk. Internet Infinity is currently generating about -0.06 per unit of risk. If you would invest  14,412  in Johnson Johnson on December 22, 2024 and sell it today you would earn a total of  1,951  from holding Johnson Johnson or generate 13.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.75%
Values	Daily Returns

Johnson Johnson  vs.  Internet Infinity

Johnson Johnson

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson are ranked lower than 15 (%) 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.

Internet Infinity

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Johnson Johnson and Internet Infinity

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

The idea behind Johnson Johnson and Internet Infinity 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.