Correlation Between Capital Product and Johnson Johnson

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Can any of the company-specific risk be diversified away by investing in both Capital Product 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 Capital Product and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Product Partners and Johnson Johnson, you can compare the effects of market volatilities on Capital Product 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 Capital Product with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Product and Johnson Johnson.

Diversification Opportunities for Capital Product and Johnson Johnson

0.05
  Correlation Coefficient

Significant diversification

The 3 months correlation between Capital and Johnson is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Capital Product Partners and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Capital Product 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 Capital Product Partners 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 Capital Product i.e., Capital Product and Johnson Johnson go up and down completely randomly.

Pair Corralation between Capital Product and Johnson Johnson

Given the investment horizon of 90 days Capital Product Partners is expected to generate 2.31 times more return on investment than Johnson Johnson. However, Capital Product is 2.31 times more volatile than Johnson Johnson. It trades about 0.07 of its potential returns per unit of risk. Johnson Johnson is currently generating about -0.12 per unit of risk. If you would invest  1,704  in Capital Product Partners on December 29, 2023 and sell it today you would earn a total of  41.00  from holding Capital Product Partners or generate 2.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Capital Product Partners  vs.  Johnson Johnson

 Performance 
       Timeline  
Capital Product Partners 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Capital Product Partners are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, Capital Product reported solid returns over the last few months and may actually be approaching a breakup point.
Johnson Johnson 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Johnson Johnson are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Johnson Johnson is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Capital Product and Johnson Johnson Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Capital Product and Johnson Johnson

The main advantage of trading using opposite Capital Product and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Product 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 Capital Product Partners 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.
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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