Correlation Between Johnson Johnson and Universal Media

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

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

Diversification Opportunities for Johnson Johnson and Universal Media

0.51

Correlation Coefficient

Johnson Johnson  Universal Media

Very weak diversification

The 3 months correlation between Johnson and Universal is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Universal Media Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Media Group 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 Universal Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Media Group has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Universal Media go up and down completely randomly.

Pair Corralation between Johnson Johnson and Universal Media

Considering the 90-day investment horizon Johnson Johnson is expected to generate 10.07 times less return on investment than Universal Media. But when comparing it to its historical volatility, Johnson Johnson is 14.84 times less risky than Universal Media. It trades about 0.19 of its potential returns per unit of risk. Universal Media Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2.90  in Universal Media Group on December 21, 2024 and sell it today you would earn a total of  2.10  from holding Universal Media Group or generate 72.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Johnson Johnson  vs.  Universal Media Group

Johnson Johnson

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Johnson Johnson revealed solid returns over the last few months and may actually be approaching a breakup point.

Universal Media Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Media Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, Universal Media reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Johnson Johnson and Universal Media

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

The idea behind Johnson Johnson and Universal Media Group 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.