Correlation Between Scilex Holding and Johnson Johnson

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

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

Diversification Opportunities for Scilex Holding and Johnson Johnson

-0.91

Correlation Coefficient

Scilex Holding  Johnson Johnson

Pay attention - limited upside

The 3 months correlation between Scilex and Johnson is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Scilex Holding and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Scilex Holding 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 Scilex Holding 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 Scilex Holding i.e., Scilex Holding and Johnson Johnson go up and down completely randomly.

Pair Corralation between Scilex Holding and Johnson Johnson

Given the investment horizon of 90 days Scilex Holding is expected to under-perform the Johnson Johnson. In addition to that, Scilex Holding is 4.88 times more volatile than Johnson Johnson. It trades about -0.11 of its total potential returns per unit of risk. Johnson Johnson is currently generating about 0.18 per unit of volatility. If you would invest  14,390  in Johnson Johnson on December 27, 2024 and sell it today you would earn a total of  1,922  from holding Johnson Johnson or generate 13.36% return on investment over 90 days.

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

Scilex Holding  vs.  Johnson Johnson

Scilex Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Scilex Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Johnson Johnson

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson are ranked lower than 14 (%) 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 Scilex Holding and Johnson Johnson

The main advantage of trading using opposite Scilex Holding and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scilex Holding 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 Scilex Holding 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.