Correlation Between BELLUS Health and Johnson Johnson

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

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

Diversification Opportunities for BELLUS Health and Johnson Johnson

-0.22

Correlation Coefficient

BELLUS Health  Johnson Johnson

Very good diversification

The 3 months correlation between BELLUS and Johnson is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding BELLUS Health and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and BELLUS Health 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 BELLUS Health 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 BELLUS Health i.e., BELLUS Health and Johnson Johnson go up and down completely randomly.

Pair Corralation between BELLUS Health and Johnson Johnson

If you would invest  1,474  in BELLUS Health on February 7, 2024 and sell it today you would earn a total of  0.00  from holding BELLUS Health or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

BELLUS Health  vs.  Johnson Johnson

BELLUS Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BELLUS Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, BELLUS Health is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Johnson Johnson

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Johnson Johnson has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Johnson Johnson is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with BELLUS Health and Johnson Johnson

The main advantage of trading using opposite BELLUS Health and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BELLUS Health 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 BELLUS Health 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.