Correlation Between Johnson Johnson and Sonida Senior

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

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

Diversification Opportunities for Johnson Johnson and Sonida Senior

0.76

Correlation Coefficient

Johnson Johnson  Sonida Senior

Poor diversification

The 3 months correlation between Johnson and Sonida is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Sonida Senior Living in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonida Senior Living 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 Sonida Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonida Senior Living has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Sonida Senior go up and down completely randomly.

Pair Corralation between Johnson Johnson and Sonida Senior

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the Sonida Senior. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 2.87 times less risky than Sonida Senior. The stock trades about -0.14 of its potential returns per unit of risk. The Sonida Senior Living is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,484  in Sonida Senior Living on October 25, 2024 and sell it today you would lose (151.00) from holding Sonida Senior Living or give up 6.08% of portfolio value over 90 days.

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

Johnson Johnson  vs.  Sonida Senior Living

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.

Sonida Senior Living

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sonida Senior Living has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Sonida Senior is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Johnson Johnson and Sonida Senior

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

The idea behind Johnson Johnson and Sonida Senior Living 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.