Correlation Between Johnson Johnson and Senti Biosciences

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

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

Diversification Opportunities for Johnson Johnson and Senti Biosciences

-0.09

Correlation Coefficient

Johnson Johnson  Senti Biosciences

Good diversification

The 3 months correlation between Johnson and Senti is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Senti Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senti Biosciences 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 Senti Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senti Biosciences has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Senti Biosciences go up and down completely randomly.

Pair Corralation between Johnson Johnson and Senti Biosciences

Considering the 90-day investment horizon Johnson Johnson is expected to generate 35.36 times less return on investment than Senti Biosciences. But when comparing it to its historical volatility, Johnson Johnson is 40.83 times less risky than Senti Biosciences. It trades about 0.12 of its potential returns per unit of risk. Senti Biosciences is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  216.00  in Senti Biosciences on November 29, 2024 and sell it today you would earn a total of  168.00  from holding Senti Biosciences or generate 77.78% return on investment over 90 days.

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

Johnson Johnson  vs.  Senti Biosciences

Johnson Johnson

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson are ranked lower than 9 (%) 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 March 2025.

Senti Biosciences

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Senti Biosciences are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Senti Biosciences demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Johnson Johnson and Senti Biosciences

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

The idea behind Johnson Johnson and Senti Biosciences 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.