Correlation Between Johnson Johnson and 502413BE6

Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and 502413BE6 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 502413BE6 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Johnson Johnson and L3 TECHNOLOGIES INC, you can compare the effects of market volatilities on Johnson Johnson and 502413BE6 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 502413BE6. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and 502413BE6.

Diversification Opportunities for Johnson Johnson and 502413BE6

-0.42

Correlation Coefficient

Johnson Johnson  502413BE6

Very good diversification

The 3 months correlation between Johnson and 502413BE6 is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and L3 TECHNOLOGIES INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on L3 TECHNOLOGIES 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 502413BE6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of L3 TECHNOLOGIES INC has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and 502413BE6 go up and down completely randomly.

Pair Corralation between Johnson Johnson and 502413BE6

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the 502413BE6. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 1.18 times less risky than 502413BE6. The stock trades about -0.15 of its potential returns per unit of risk. The L3 TECHNOLOGIES INC is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  9,697  in L3 TECHNOLOGIES INC on October 20, 2024 and sell it today you would lose (77.00) from holding L3 TECHNOLOGIES INC or give up 0.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	20.97%
Values	Daily Returns

Johnson Johnson  vs.  L3 TECHNOLOGIES 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 conflicting 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.

L3 TECHNOLOGIES INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days L3 TECHNOLOGIES INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 502413BE6 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Johnson Johnson and 502413BE6

The main advantage of trading using opposite Johnson Johnson and 502413BE6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, 502413BE6 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 502413BE6 will offset losses from the drop in 502413BE6's long position.

The idea behind Johnson Johnson and L3 TECHNOLOGIES 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.