Correlation Between Johnson Johnson and Ono Pharmaceutical

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

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

Diversification Opportunities for Johnson Johnson and Ono Pharmaceutical

0.69

Correlation Coefficient

Johnson Johnson  Ono Pharmaceutical

Poor diversification

The 3 months correlation between Johnson and Ono is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Ono Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ono Pharmaceutical 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 Ono Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ono Pharmaceutical has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Ono Pharmaceutical go up and down completely randomly.

Pair Corralation between Johnson Johnson and Ono Pharmaceutical

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the Ono Pharmaceutical. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 10.77 times less risky than Ono Pharmaceutical. The stock trades about -0.19 of its potential returns per unit of risk. The Ono Pharmaceutical Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,326  in Ono Pharmaceutical Co on September 12, 2024 and sell it today you would lose (76.00) from holding Ono Pharmaceutical Co or give up 5.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	36.51%
Values	Daily Returns

Johnson Johnson  vs.  Ono Pharmaceutical Co

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.

Ono Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ono Pharmaceutical Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Ono Pharmaceutical 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 Ono Pharmaceutical

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

The idea behind Johnson Johnson and Ono Pharmaceutical Co 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.