Correlation Between Johnson Johnson and Invesco NASDAQ

Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and Invesco 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 Invesco 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 Invesco NASDAQ Next, you can compare the effects of market volatilities on Johnson Johnson and Invesco 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 Invesco NASDAQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and Invesco NASDAQ.

Diversification Opportunities for Johnson Johnson and Invesco NASDAQ

0.1

Correlation Coefficient

Johnson Johnson  Invesco NASDAQ

Average diversification

The 3 months correlation between Johnson and Invesco is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Invesco NASDAQ Next in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco NASDAQ Next 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 Invesco NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco NASDAQ Next has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Invesco NASDAQ go up and down completely randomly.

Pair Corralation between Johnson Johnson and Invesco NASDAQ

Considering the 90-day investment horizon Johnson Johnson is expected to generate 1.25 times more return on investment than Invesco NASDAQ. However, Johnson Johnson is 1.25 times more volatile than Invesco NASDAQ Next. It trades about 0.11 of its potential returns per unit of risk. Invesco NASDAQ Next is currently generating about -0.07 per unit of risk. If you would invest  15,357  in Johnson Johnson on December 2, 2024 and sell it today you would earn a total of  1,145  from holding Johnson Johnson or generate 7.46% return on investment over 90 days.

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

Johnson Johnson  vs.  Invesco NASDAQ Next

Johnson Johnson

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson are ranked lower than 8 (%) 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.

Invesco NASDAQ Next

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco NASDAQ Next has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Invesco NASDAQ is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Johnson Johnson and Invesco NASDAQ

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

The idea behind Johnson Johnson and Invesco NASDAQ Next 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 Commodity Directory module to find actively traded commodities issued by global exchanges.