Correlation Between Skyline and JOHNSON

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

By analyzing existing cross correlation between Skyline and JOHNSON JOHNSON 585, you can compare the effects of market volatilities on Skyline and 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 Skyline with a short position of JOHNSON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skyline and JOHNSON.

Diversification Opportunities for Skyline and JOHNSON

-0.35

Correlation Coefficient

Skyline  JOHNSON

Very good diversification

The 3 months correlation between Skyline and JOHNSON is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Skyline and JOHNSON JOHNSON 585 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JOHNSON JOHNSON 585 and Skyline 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 Skyline are associated (or correlated) with 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 585 has no effect on the direction of Skyline i.e., Skyline and JOHNSON go up and down completely randomly.

Pair Corralation between Skyline and JOHNSON

Considering the 90-day investment horizon Skyline is expected to generate 2.29 times more return on investment than JOHNSON. However, Skyline is 2.29 times more volatile than JOHNSON JOHNSON 585. It trades about 0.05 of its potential returns per unit of risk. JOHNSON JOHNSON 585 is currently generating about 0.0 per unit of risk. If you would invest  5,506  in Skyline on October 10, 2024 and sell it today you would earn a total of  3,066  from holding Skyline or generate 55.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.1%
Values	Daily Returns

Skyline  vs.  JOHNSON JOHNSON 585

Skyline

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skyline has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

JOHNSON JOHNSON 585

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JOHNSON JOHNSON 585 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, JOHNSON is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Skyline and JOHNSON

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

The idea behind Skyline and JOHNSON JOHNSON 585 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.