Correlation Between Johnson Johnson and ProShares Short

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

By analyzing existing cross correlation between Johnson Johnson and ProShares Short 7 10, you can compare the effects of market volatilities on Johnson Johnson and ProShares Short 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 ProShares Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and ProShares Short.

Diversification Opportunities for Johnson Johnson and ProShares Short

-0.71

Correlation Coefficient

Johnson Johnson  ProShares Short

Pay attention - limited upside

The 3 months correlation between Johnson and ProShares is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and ProShares Short 7 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short 7 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 ProShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short 7 has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and ProShares Short go up and down completely randomly.

Pair Corralation between Johnson Johnson and ProShares Short

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the ProShares Short. In addition to that, Johnson Johnson is 2.33 times more volatile than ProShares Short 7 10. It trades about -0.24 of its total potential returns per unit of risk. ProShares Short 7 10 is currently generating about 0.0 per unit of volatility. If you would invest  2,973  in ProShares Short 7 10 on September 19, 2024 and sell it today you would lose (1.00) from holding ProShares Short 7 10 or give up 0.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Johnson Johnson  vs.  ProShares Short 7 10

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 uncertain 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.

ProShares Short 7

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Short 7 10 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, ProShares Short 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 ProShares Short

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

The idea behind Johnson Johnson and ProShares Short 7 10 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.