Correlation Between Johnson Johnson and Altria
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and Altria 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 Altria into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and Altria Group, you can compare the effects of market volatilities on Johnson Johnson and Altria 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 Altria. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and Altria.
Diversification Opportunities for Johnson Johnson and Altria
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Johnson and Altria is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Altria Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altria Group 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 Altria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altria Group has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Altria go up and down completely randomly.
Pair Corralation between Johnson Johnson and Altria
Considering the 90-day investment horizon Johnson Johnson is expected to generate 4.39 times less return on investment than Altria. But when comparing it to its historical volatility, Johnson Johnson is 1.44 times less risky than Altria. It trades about 0.03 of its potential returns per unit of risk. Altria Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3,756 in Altria Group on January 25, 2024 and sell it today you would earn a total of 531.00 from holding Altria Group or generate 14.14% 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. Altria Group
Performance |
Timeline |
Johnson Johnson |
Altria Group |
Johnson Johnson and Altria Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Johnson Johnson and Altria
The main advantage of trading using opposite Johnson Johnson and Altria positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, Altria 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 Altria will offset losses from the drop in Altria's long position.Johnson Johnson vs. Merck Company | Johnson Johnson vs. Bristol Myers Squibb | Johnson Johnson vs. Amgen Inc | Johnson Johnson vs. Pfizer Inc |
Altria vs. British American Tobacco | Altria vs. Universal | Altria vs. Vector Group | Altria vs. Imperial Brands PLC |
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 Stocks Directory module to find actively traded stocks across global markets.
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