Correlation Between Johnson Johnson and Apple
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and Apple 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 Johnson Johnson and Apple into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and Apple Inc, you can compare the effects of market volatilities on Johnson Johnson and Apple 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 Johnson Johnson with a short position of Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and Apple.
Diversification Opportunities for Johnson Johnson and Apple
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Johnson and Apple is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and Johnson Johnson 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 Johnson Johnson are associated (or correlated) with Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Apple go up and down completely randomly.
Pair Corralation between Johnson Johnson and Apple
Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the Apple. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 1.73 times less risky than Apple. The stock trades about -0.02 of its potential returns per unit of risk. The Apple Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 16,414 in Apple Inc on January 24, 2024 and sell it today you would earn a total of 170.00 from holding Apple Inc or generate 1.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Johnson vs. Apple Inc
Performance |
| Timeline |
| Johnson Johnson |
| Apple Inc |
Johnson Johnson and Apple Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Johnson and Apple
The main advantage of trading using opposite Johnson Johnson and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, Apple 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 Apple will offset losses from the drop in Apple's long position.| 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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