Correlation Between JPMorgan Chase and Johnson Johnson

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

By analyzing existing cross correlation between JPMorgan Chase Co and Johnson Johnson, you can compare the effects of market volatilities on JPMorgan Chase and Johnson Johnson 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 JPMorgan Chase with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Chase and Johnson Johnson.

Diversification Opportunities for JPMorgan Chase and Johnson Johnson

-0.05

Correlation Coefficient

JPMorgan Chase  Johnson Johnson

Good diversification

The 3 months correlation between JPMorgan and Johnson is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and JPMorgan Chase 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 JPMorgan Chase Co are associated (or correlated) with Johnson Johnson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Johnson has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and Johnson Johnson go up and down completely randomly.

Pair Corralation between JPMorgan Chase and Johnson Johnson

Considering the 90-day investment horizon JPMorgan Chase is expected to generate 5.38 times less return on investment than Johnson Johnson. In addition to that, JPMorgan Chase is 1.36 times more volatile than Johnson Johnson. It trades about 0.03 of its total potential returns per unit of risk. Johnson Johnson is currently generating about 0.21 per unit of volatility. If you would invest  14,220  in Johnson Johnson on December 30, 2024 and sell it today you would earn a total of  2,151  from holding Johnson Johnson or generate 15.13% return on investment over 90 days.

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

JPMorgan Chase Co  vs.  Johnson Johnson

JPMorgan Chase

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, JPMorgan Chase is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Johnson Johnson

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Johnson Johnson revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JPMorgan Chase and Johnson Johnson

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

The idea behind JPMorgan Chase Co and Johnson Johnson 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.