Correlation Between Johnson Johnson and Legg Mason

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

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

Diversification Opportunities for Johnson Johnson and Legg Mason

-0.75

Correlation Coefficient

Johnson Johnson  Legg Mason

Pay attention - limited upside

The 3 months correlation between Johnson and Legg is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Legg Mason Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Partners 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 Legg Mason. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legg Mason Partners has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Legg Mason go up and down completely randomly.

Pair Corralation between Johnson Johnson and Legg Mason

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the Legg Mason. In addition to that, Johnson Johnson is 1.27 times more volatile than Legg Mason Partners. It trades about -0.13 of its total potential returns per unit of risk. Legg Mason Partners is currently generating about 0.19 per unit of volatility. If you would invest  1,507  in Legg Mason Partners on September 3, 2024 and sell it today you would earn a total of  115.00  from holding Legg Mason Partners or generate 7.63% return on investment over 90 days.

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

Johnson Johnson  vs.  Legg Mason Partners

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.

Legg Mason Partners

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Legg Mason Partners are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Legg Mason may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Johnson Johnson and Legg Mason

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

The idea behind Johnson Johnson and Legg Mason Partners 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.