Correlation Between Johnson Johnson and Short Duration

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

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

Diversification Opportunities for Johnson Johnson and Short Duration

-0.46

Correlation Coefficient

Johnson Johnson  Short Duration

Very good diversification

The 3 months correlation between Johnson and Short is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Short Duration Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration Income 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 Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Income has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Short Duration go up and down completely randomly.

Pair Corralation between Johnson Johnson and Short Duration

If you would invest (100.00) in Short Duration Income on September 4, 2024 and sell it today you would earn a total of  100.00  from holding Short Duration Income or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	0.0%
Values	Daily Returns

Johnson Johnson  vs.  Short Duration Income

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.

Short Duration Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Short Duration Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Short Duration is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Johnson Johnson and Short Duration

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

The idea behind Johnson Johnson and Short Duration Income 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.