Correlation Between First Trust and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Japan and Johnson Johnson, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Johnson Johnson.
Diversification Opportunities for First Trust and Johnson Johnson
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Johnson is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Japan and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and First Trust 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 First Trust Japan 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 First Trust i.e., First Trust and Johnson Johnson go up and down completely randomly.
Pair Corralation between First Trust and Johnson Johnson
Considering the 90-day investment horizon First Trust Japan is expected to generate 1.27 times more return on investment than Johnson Johnson. However, First Trust is 1.27 times more volatile than Johnson Johnson. It trades about -0.01 of its potential returns per unit of risk. Johnson Johnson is currently generating about -0.22 per unit of risk. If you would invest 5,308 in First Trust Japan on January 24, 2024 and sell it today you would lose (24.00) from holding First Trust Japan or give up 0.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Japan vs. Johnson Johnson
Performance |
| Timeline |
| First Trust Japan |
| Johnson Johnson |
First Trust and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Johnson Johnson
The main advantage of trading using opposite First Trust and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. iShares MSCI Israel | First Trust vs. iShares MSCI China | First Trust vs. Aquagold International | First Trust vs. Morningstar Unconstrained Allocation |
| Johnson Johnson vs. Silver Spike Investment | Johnson Johnson vs. Alkermes Plc | Johnson Johnson vs. Eagle Pharmaceuticals | Johnson Johnson vs. Evotec SE ADR |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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