Correlation Between Johnson Johnson and NuShares ETF

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

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

Diversification Opportunities for Johnson Johnson and NuShares ETF

0.39

Correlation Coefficient

Johnson Johnson  NuShares ETF

Weak diversification

The 3 months correlation between Johnson and NuShares is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and NuShares ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NuShares ETF Trust 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 NuShares ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NuShares ETF Trust has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and NuShares ETF go up and down completely randomly.

Pair Corralation between Johnson Johnson and NuShares ETF

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the NuShares ETF. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 1.03 times less risky than NuShares ETF. The stock trades about -0.15 of its potential returns per unit of risk. The NuShares ETF Trust is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  3,045  in NuShares ETF Trust on October 27, 2024 and sell it today you would lose (105.00) from holding NuShares ETF Trust or give up 3.45% of portfolio value over 90 days.

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

Johnson Johnson  vs.  NuShares ETF Trust

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 conflicting 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.

NuShares ETF Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NuShares ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, NuShares ETF is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Johnson Johnson and NuShares ETF

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

The idea behind Johnson Johnson and NuShares ETF Trust 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.