Correlation Between Johnson Johnson and ProShares Nasdaq

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

By analyzing existing cross correlation between Johnson Johnson and ProShares Nasdaq 100 Dorsey, you can compare the effects of market volatilities on Johnson Johnson and ProShares Nasdaq 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 ProShares Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and ProShares Nasdaq.

Diversification Opportunities for Johnson Johnson and ProShares Nasdaq

-0.72

Correlation Coefficient

Johnson Johnson  ProShares Nasdaq

Pay attention - limited upside

The 3 months correlation between Johnson and ProShares is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and ProShares Nasdaq 100 Dorsey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Nasdaq 100 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 ProShares Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Nasdaq 100 has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and ProShares Nasdaq go up and down completely randomly.

Pair Corralation between Johnson Johnson and ProShares Nasdaq

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the ProShares Nasdaq. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 1.38 times less risky than ProShares Nasdaq. The stock trades about -0.16 of its potential returns per unit of risk. The ProShares Nasdaq 100 Dorsey is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,436  in ProShares Nasdaq 100 Dorsey on October 25, 2024 and sell it today you would earn a total of  529.00  from holding ProShares Nasdaq 100 Dorsey or generate 11.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Johnson Johnson  vs.  ProShares Nasdaq 100 Dorsey

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.

ProShares Nasdaq 100

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Nasdaq 100 Dorsey are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, ProShares Nasdaq may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Johnson Johnson and ProShares Nasdaq

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

The idea behind Johnson Johnson and ProShares Nasdaq 100 Dorsey 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.