Correlation Between Jackson Financial and Johnson Johnson

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

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

Diversification Opportunities for Jackson Financial and Johnson Johnson

-0.2

Correlation Coefficient

Jackson Financial  Johnson Johnson

Good diversification

The 3 months correlation between Jackson and Johnson is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Jackson Financial and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Jackson Financial 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 Jackson Financial 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 Jackson Financial i.e., Jackson Financial and Johnson Johnson go up and down completely randomly.

Pair Corralation between Jackson Financial and Johnson Johnson

Assuming the 90 days trading horizon Jackson Financial is expected to under-perform the Johnson Johnson. But the preferred stock apears to be less risky and, when comparing its historical volatility, Jackson Financial is 1.64 times less risky than Johnson Johnson. The preferred stock trades about -0.01 of its potential returns per unit of risk. The Johnson Johnson is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  14,220  in Johnson Johnson on December 29, 2024 and sell it today you would earn a total of  2,093  from holding Johnson Johnson or generate 14.72% return on investment over 90 days.

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

Jackson Financial  vs.  Johnson Johnson

Jackson Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jackson Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jackson Financial is not utilizing all of its potentials. The current stock price disturbance, 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 uncertain basic indicators, Johnson Johnson revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jackson Financial and Johnson Johnson

The main advantage of trading using opposite Jackson Financial and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jackson Financial 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 Jackson Financial 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.