Correlation Between Johnson Johnson and ALVGR

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

By analyzing existing cross correlation between Johnson Johnson and ALVGR 35, you can compare the effects of market volatilities on Johnson Johnson and ALVGR 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 ALVGR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and ALVGR.

Diversification Opportunities for Johnson Johnson and ALVGR

-0.24

Correlation Coefficient

Johnson Johnson  ALVGR

Very good diversification

The 3 months correlation between Johnson and ALVGR is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and ALVGR 35 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALVGR 35 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 ALVGR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALVGR 35 has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and ALVGR go up and down completely randomly.

Pair Corralation between Johnson Johnson and ALVGR

Considering the 90-day investment horizon Johnson Johnson is expected to generate 5.5 times less return on investment than ALVGR. But when comparing it to its historical volatility, Johnson Johnson is 1.13 times less risky than ALVGR. It trades about 0.03 of its potential returns per unit of risk. ALVGR 35 is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  7,620  in ALVGR 35 on December 2, 2024 and sell it today you would earn a total of  2,150  from holding ALVGR 35 or generate 28.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	28.89%
Values	Daily Returns

Johnson Johnson  vs.  ALVGR 35

Johnson Johnson

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Johnson Johnson may actually be approaching a critical reversion point that can send shares even higher in April 2025.

ALVGR 35

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ALVGR 35 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ALVGR 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 ALVGR

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

The idea behind Johnson Johnson and ALVGR 35 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.