Correlation Between Johnson Johnson and Black Knight

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

Diversification Opportunities for Johnson Johnson and Black Knight

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Johnson and Black is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Black Knight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Knight 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 Black Knight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Knight has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Black Knight go up and down completely randomly.

Pair Corralation between Johnson Johnson and Black Knight

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the Black Knight. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 1.64 times less risky than Black Knight. The stock trades about -0.01 of its potential returns per unit of risk. The Black Knight is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6,791  in Black Knight on February 17, 2024 and sell it today you would earn a total of  785.00  from holding Black Knight or generate 11.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy64.24%
ValuesDaily Returns

Johnson Johnson  vs.  Black Knight

 Performance 
       Timeline  
Johnson Johnson 

Risk-Adjusted Performance

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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 current stock price chaos, may contribute to medium-term losses for the stakeholders.
Black Knight 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Black Knight has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking signals, Black Knight is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Johnson Johnson and Black Knight Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Johnson Johnson and Black Knight

The main advantage of trading using opposite Johnson Johnson and Black Knight positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, Black Knight 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 Black Knight will offset losses from the drop in Black Knight's long position.
The idea behind Johnson Johnson and Black Knight 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 Stocks Directory module to find actively traded stocks across global markets.

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