Correlation Between Johnson Johnson and SPDR SSGA

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

By analyzing existing cross correlation between Johnson Johnson and SPDR SSGA My2027, you can compare the effects of market volatilities on Johnson Johnson and SPDR SSGA 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 SPDR SSGA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and SPDR SSGA.

Diversification Opportunities for Johnson Johnson and SPDR SSGA

-0.33

Correlation Coefficient

Johnson Johnson  SPDR SSGA

Very good diversification

The 3 months correlation between Johnson and SPDR is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and SPDR SSGA My2027 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSGA My2027 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 SPDR SSGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSGA My2027 has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and SPDR SSGA go up and down completely randomly.

Pair Corralation between Johnson Johnson and SPDR SSGA

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the SPDR SSGA. In addition to that, Johnson Johnson is 9.22 times more volatile than SPDR SSGA My2027. It trades about -0.11 of its total potential returns per unit of risk. SPDR SSGA My2027 is currently generating about -0.21 per unit of volatility. If you would invest  2,493  in SPDR SSGA My2027 on October 9, 2024 and sell it today you would lose (11.00) from holding SPDR SSGA My2027 or give up 0.44% of portfolio value over 90 days.

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

Johnson Johnson  vs.  SPDR SSGA My2027

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 uncertain 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.

SPDR SSGA My2027

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SSGA My2027 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, SPDR SSGA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Johnson Johnson and SPDR SSGA

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

The idea behind Johnson Johnson and SPDR SSGA My2027 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.