Correlation Between Johnson Johnson and IShares Russell

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

By analyzing existing cross correlation between Johnson Johnson and iShares Russell 3000, you can compare the effects of market volatilities on Johnson Johnson and IShares Russell 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 IShares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and IShares Russell.

Diversification Opportunities for Johnson Johnson and IShares Russell

-0.71

Correlation Coefficient

Johnson Johnson  IShares Russell

Pay attention - limited upside

The 3 months correlation between Johnson and IShares is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and iShares Russell 3000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell 3000 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 IShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Russell 3000 has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and IShares Russell go up and down completely randomly.

Pair Corralation between Johnson Johnson and IShares Russell

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the IShares Russell. In addition to that, Johnson Johnson is 1.05 times more volatile than iShares Russell 3000. It trades about -0.14 of its total potential returns per unit of risk. iShares Russell 3000 is currently generating about 0.22 per unit of volatility. If you would invest  31,252  in iShares Russell 3000 on September 4, 2024 and sell it today you would earn a total of  3,422  from holding iShares Russell 3000 or generate 10.95% return on investment over 90 days.

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

Johnson Johnson  vs.  iShares Russell 3000

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.

iShares Russell 3000

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell 3000 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, IShares Russell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Johnson Johnson and IShares Russell

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

The idea behind Johnson Johnson and iShares Russell 3000 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..