Correlation Between KKR Co and Johnson Johnson

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

Diversification Opportunities for KKR Co and Johnson Johnson

-0.65
  Correlation Coefficient

Excellent diversification

The 3 months correlation between KKR Co and Johnson is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding KKR Co LP and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and KKR Co 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 KKR Co LP 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 KKR Co i.e., KKR Co and Johnson Johnson go up and down completely randomly.

Pair Corralation between KKR Co and Johnson Johnson

Considering the 90-day investment horizon KKR Co LP is expected to generate 2.82 times more return on investment than Johnson Johnson. However, KKR Co is 2.82 times more volatile than Johnson Johnson. It trades about 0.08 of its potential returns per unit of risk. Johnson Johnson is currently generating about -0.05 per unit of risk. If you would invest  5,119  in KKR Co LP on November 4, 2022 and sell it today you would earn a total of  580.00  from holding KKR Co LP or generate 11.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

KKR Co LP  vs.  Johnson Johnson

 Performance (%) 
       Timeline  
KKR Co LP 
KKR Co Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in KKR Co LP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady forward-looking signals, KKR Co reported solid returns over the last few months and may actually be approaching a breakup point.

KKR Co Price Channel

Johnson Johnson 
Johnson Performance
0 of 100
Over the last 90 days Johnson Johnson has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Johnson Johnson is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Johnson Price Channel

KKR Co and Johnson Johnson Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with KKR Co and Johnson Johnson

The main advantage of trading using opposite KKR Co and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KKR Co 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.
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The idea behind KKR Co LP 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.
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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