Correlation Between Johnson Johnson and NeuroSense Therapeutics

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

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

Diversification Opportunities for Johnson Johnson and NeuroSense Therapeutics

-0.55

Correlation Coefficient

Johnson Johnson  NeuroSense Therapeutics

Excellent diversification

The 3 months correlation between Johnson and NeuroSense is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and NeuroSense Therapeutics Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NeuroSense Therapeutics 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 NeuroSense Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NeuroSense Therapeutics has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and NeuroSense Therapeutics go up and down completely randomly.

Pair Corralation between Johnson Johnson and NeuroSense Therapeutics

Considering the 90-day investment horizon Johnson Johnson is expected to generate 3.19 times less return on investment than NeuroSense Therapeutics. But when comparing it to its historical volatility, Johnson Johnson is 23.52 times less risky than NeuroSense Therapeutics. It trades about 0.45 of its potential returns per unit of risk. NeuroSense Therapeutics Ltd is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  25.00  in NeuroSense Therapeutics Ltd on December 5, 2024 and sell it today you would lose (4.00) from holding NeuroSense Therapeutics Ltd or give up 16.0% of portfolio value over 90 days.

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

Johnson Johnson  vs.  NeuroSense Therapeutics Ltd

Johnson Johnson

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Johnson Johnson may actually be approaching a critical reversion point that can send shares even higher in April 2025.

NeuroSense Therapeutics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NeuroSense Therapeutics Ltd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, NeuroSense Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Johnson Johnson and NeuroSense Therapeutics

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

The idea behind Johnson Johnson and NeuroSense Therapeutics Ltd 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.