Correlation Between Johnson Johnson and 493267AK4

Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and 493267AK4 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 493267AK4 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Johnson Johnson and KEY 5, you can compare the effects of market volatilities on Johnson Johnson and 493267AK4 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 493267AK4. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and 493267AK4.

Diversification Opportunities for Johnson Johnson and 493267AK4

0.64

Correlation Coefficient

Johnson Johnson  493267AK4

Poor diversification

The 3 months correlation between Johnson and 493267AK4 is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and KEY 5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 493267AK4 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 493267AK4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 493267AK4 has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and 493267AK4 go up and down completely randomly.

Pair Corralation between Johnson Johnson and 493267AK4

Considering the 90-day investment horizon Johnson Johnson is expected to generate 47.95 times less return on investment than 493267AK4. But when comparing it to its historical volatility, Johnson Johnson is 1.65 times less risky than 493267AK4. It trades about 0.0 of its potential returns per unit of risk. KEY 5 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6,750  in KEY 5 on September 19, 2024 and sell it today you would earn a total of  2,072  from holding KEY 5 or generate 30.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.31%
Values	Daily Returns

Johnson Johnson  vs.  KEY 5

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.

493267AK4

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEY 5 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for KEY 5 investors.

Pair Trading with Johnson Johnson and 493267AK4

The main advantage of trading using opposite Johnson Johnson and 493267AK4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, 493267AK4 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 493267AK4 will offset losses from the drop in 493267AK4's long position.

The idea behind Johnson Johnson and KEY 5 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.