Correlation Between Walmart and Johnson Johnson

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

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

Diversification Opportunities for Walmart and Johnson Johnson

0.82

Correlation Coefficient

Walmart  Johnson Johnson

Very poor diversification

The 3 months correlation between Walmart and Johnson is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Johnson Johnson Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Walmart 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 Walmart 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 Walmart i.e., Walmart and Johnson Johnson go up and down completely randomly.

Pair Corralation between Walmart and Johnson Johnson

Assuming the 90 days trading horizon Walmart is expected to generate 1.26 times less return on investment than Johnson Johnson. In addition to that, Walmart is 1.07 times more volatile than Johnson Johnson Co. It trades about 0.16 of its total potential returns per unit of risk. Johnson Johnson Co is currently generating about 0.21 per unit of volatility. If you would invest  1,110,000  in Johnson Johnson Co on December 4, 2024 and sell it today you would earn a total of  225,000  from holding Johnson Johnson Co or generate 20.27% return on investment over 90 days.

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

Walmart  vs.  Johnson Johnson Co

Walmart

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Walmart sustained solid returns over the last few months and may actually be approaching a breakup point.

Johnson Johnson

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward-looking indicators, Johnson Johnson sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Johnson Johnson

The main advantage of trading using opposite Walmart and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart 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 Walmart and Johnson Johnson Co 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.