Correlation Between Johnson Johnson and Santa Cruz

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

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

Diversification Opportunities for Johnson Johnson and Santa Cruz

-0.68

Correlation Coefficient

Johnson Johnson  Santa Cruz

Excellent diversification

The 3 months correlation between Johnson and Santa is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Santa Cruz County in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santa Cruz County 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 Santa Cruz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santa Cruz County has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Santa Cruz go up and down completely randomly.

Pair Corralation between Johnson Johnson and Santa Cruz

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the Santa Cruz. In addition to that, Johnson Johnson is 1.11 times more volatile than Santa Cruz County. It trades about -0.13 of its total potential returns per unit of risk. Santa Cruz County is currently generating about 0.14 per unit of volatility. If you would invest  3,908  in Santa Cruz County on September 2, 2024 and sell it today you would earn a total of  242.00  from holding Santa Cruz County or generate 6.19% 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.  Santa Cruz County

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.

Santa Cruz County

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Santa Cruz County are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Santa Cruz is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Johnson Johnson and Santa Cruz

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

The idea behind Johnson Johnson and Santa Cruz County 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.