Correlation Between Johnson Johnson and SohuCom
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and SohuCom 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 SohuCom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and SohuCom, you can compare the effects of market volatilities on Johnson Johnson and SohuCom 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 SohuCom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and SohuCom.
Diversification Opportunities for Johnson Johnson and SohuCom
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Johnson and SohuCom is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and SohuCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SohuCom 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 SohuCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SohuCom has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and SohuCom go up and down completely randomly.
Pair Corralation between Johnson Johnson and SohuCom
Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the SohuCom. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 1.7 times less risky than SohuCom. The stock trades about -0.36 of its potential returns per unit of risk. The SohuCom is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 993.00 in SohuCom on January 20, 2024 and sell it today you would earn a total of 98.00 from holding SohuCom or generate 9.87% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 95.45% |
Values | Daily Returns |
Johnson Johnson vs. SohuCom
Performance |
Timeline |
Johnson Johnson |
SohuCom |
Johnson Johnson and SohuCom Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Johnson Johnson and SohuCom
The main advantage of trading using opposite Johnson Johnson and SohuCom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, SohuCom 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 SohuCom will offset losses from the drop in SohuCom's long position.Johnson Johnson vs. Alkermes Plc | Johnson Johnson vs. Ironwood Pharmaceuticals | Johnson Johnson vs. Deciphera Pharmaceuticals LLC | Johnson Johnson vs. Eagle Pharmaceuticals |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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