Correlation Between Johnson Johnson and Summit Midstream

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

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

Diversification Opportunities for Johnson Johnson and Summit Midstream

-0.66

Correlation Coefficient

Johnson Johnson  Summit Midstream

Excellent diversification

The 3 months correlation between Johnson and Summit is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Summit Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Midstream 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 Summit Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Midstream Partners has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Summit Midstream go up and down completely randomly.

Pair Corralation between Johnson Johnson and Summit Midstream

Considering the 90-day investment horizon Johnson Johnson is expected to generate 17.4 times less return on investment than Summit Midstream. But when comparing it to its historical volatility, Johnson Johnson is 6.63 times less risky than Summit Midstream. It trades about 0.0 of its potential returns per unit of risk. Summit Midstream Partners is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,600  in Summit Midstream Partners on October 5, 2024 and sell it today you would lose (1,600) from holding Summit Midstream Partners or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	76.48%
Values	Daily Returns

Johnson Johnson  vs.  Summit Midstream 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.

Summit Midstream Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Summit Midstream Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, Summit Midstream is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Johnson Johnson and Summit Midstream

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

The idea behind Johnson Johnson and Summit Midstream 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.