Correlation Between MAG SILVER and Johnson Johnson

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

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

Diversification Opportunities for MAG SILVER and Johnson Johnson

0.38

Correlation Coefficient

MAG SILVER  Johnson Johnson

Weak diversification

The 3 months correlation between MAG and Johnson is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding MAG SILVER and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and MAG SILVER 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 MAG SILVER 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 MAG SILVER i.e., MAG SILVER and Johnson Johnson go up and down completely randomly.

Pair Corralation between MAG SILVER and Johnson Johnson

Assuming the 90 days trading horizon MAG SILVER is expected to generate 2.16 times more return on investment than Johnson Johnson. However, MAG SILVER is 2.16 times more volatile than Johnson Johnson. It trades about 0.08 of its potential returns per unit of risk. Johnson Johnson is currently generating about 0.11 per unit of risk. If you would invest  1,342  in MAG SILVER on December 20, 2024 and sell it today you would earn a total of  144.00  from holding MAG SILVER or generate 10.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

MAG SILVER  vs.  Johnson Johnson

MAG SILVER

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MAG SILVER are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, MAG SILVER unveiled solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of comparatively fragile forward-looking indicators, Johnson Johnson may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with MAG SILVER and Johnson Johnson

The main advantage of trading using opposite MAG SILVER and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAG SILVER 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 MAG SILVER 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.