Correlation Between Johnson Johnson and JPMorgan Chase

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

By analyzing existing cross correlation between Johnson Johnson and JPMorgan Chase Co, you can compare the effects of market volatilities on Johnson Johnson and JPMorgan Chase 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 JPMorgan Chase. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and JPMorgan Chase.

Diversification Opportunities for Johnson Johnson and JPMorgan Chase

-0.25

Correlation Coefficient

Johnson Johnson  JPMorgan Chase

Very good diversification

The 3 months correlation between Johnson and JPMorgan is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and JPMorgan Chase Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Chase 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 JPMorgan Chase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Chase has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and JPMorgan Chase go up and down completely randomly.

Pair Corralation between Johnson Johnson and JPMorgan Chase

Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the JPMorgan Chase. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 1.47 times less risky than JPMorgan Chase. The stock trades about -0.02 of its potential returns per unit of risk. The JPMorgan Chase Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  11,663  in JPMorgan Chase Co on January 26, 2024 and sell it today you would earn a total of  7,645  from holding JPMorgan Chase Co or generate 65.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Johnson Johnson  vs.  JPMorgan Chase Co

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 latest weak performance, the Stock's basic indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

JPMorgan Chase

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, JPMorgan Chase displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Johnson Johnson and JPMorgan Chase

The main advantage of trading using opposite Johnson Johnson and JPMorgan Chase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, JPMorgan Chase 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 JPMorgan Chase will offset losses from the drop in JPMorgan Chase's long position.

The idea behind Johnson Johnson and JPMorgan Chase Co 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.