Correlation Between Johnson Johnson and HONEYWELL

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

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

Diversification Opportunities for Johnson Johnson and HONEYWELL

0.67

Correlation Coefficient

Johnson Johnson  HONEYWELL

Poor diversification

The 3 months correlation between Johnson and HONEYWELL is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and HONEYWELL INTL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HONEYWELL INTL INC 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 HONEYWELL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HONEYWELL INTL INC has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and HONEYWELL go up and down completely randomly.

Pair Corralation between Johnson Johnson and HONEYWELL

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the HONEYWELL. In addition to that, Johnson Johnson is 2.63 times more volatile than HONEYWELL INTL INC. It trades about -0.17 of its total potential returns per unit of risk. HONEYWELL INTL INC is currently generating about -0.09 per unit of volatility. If you would invest  9,682  in HONEYWELL INTL INC on October 7, 2024 and sell it today you would lose (172.00) from holding HONEYWELL INTL INC or give up 1.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Johnson Johnson  vs.  HONEYWELL INTL INC

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 weak 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.

HONEYWELL INTL INC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Johnson Johnson and HONEYWELL

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

The idea behind Johnson Johnson and HONEYWELL INTL INC 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.