Correlation Between Johnson Johnson and VanEck Semiconductor

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

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

Diversification Opportunities for Johnson Johnson and VanEck Semiconductor

-0.45

Correlation Coefficient

Johnson Johnson  VanEck Semiconductor

Very good diversification

The 3 months correlation between Johnson and VanEck is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and VanEck Semiconductor ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Semiconductor ETF 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 VanEck Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Semiconductor ETF has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and VanEck Semiconductor go up and down completely randomly.

Pair Corralation between Johnson Johnson and VanEck Semiconductor

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the VanEck Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 2.41 times less risky than VanEck Semiconductor. The stock trades about -0.13 of its potential returns per unit of risk. The VanEck Semiconductor ETF is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  22,519  in VanEck Semiconductor ETF on September 1, 2024 and sell it today you would earn a total of  1,694  from holding VanEck Semiconductor ETF or generate 7.52% return on investment over 90 days.

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

Johnson Johnson  vs.  VanEck Semiconductor ETF

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.

VanEck Semiconductor ETF

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Semiconductor ETF are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak primary indicators, VanEck Semiconductor may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Johnson Johnson and VanEck Semiconductor

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

The idea behind Johnson Johnson and VanEck Semiconductor ETF 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.