Correlation Between Johnson Johnson and Utah Medical

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

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

Diversification Opportunities for Johnson Johnson and Utah Medical

0.68

Correlation Coefficient

Johnson Johnson  Utah Medical

Poor diversification

The 3 months correlation between Johnson and Utah is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Utah Medical Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utah Medical Products 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 Utah Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utah Medical Products has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Utah Medical go up and down completely randomly.

Pair Corralation between Johnson Johnson and Utah Medical

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the Utah Medical. In addition to that, Johnson Johnson is 1.37 times more volatile than Utah Medical Products. It trades about -0.01 of its total potential returns per unit of risk. Utah Medical Products is currently generating about 0.15 per unit of volatility. If you would invest  6,143  in Utah Medical Products on October 25, 2024 and sell it today you would earn a total of  140.00  from holding Utah Medical Products or generate 2.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Johnson Johnson  vs.  Utah Medical Products

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.

Utah Medical Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Utah Medical Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Utah Medical is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Johnson Johnson and Utah Medical

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

The idea behind Johnson Johnson and Utah Medical Products 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.