Correlation Between Amgen and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both Amgen 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 Amgen and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amgen Inc and Johnson Johnson, you can compare the effects of market volatilities on Amgen 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 Amgen with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amgen and Johnson Johnson.
Diversification Opportunities for Amgen and Johnson Johnson
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Amgen and Johnson is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Amgen 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 Amgen Inc 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 Amgen i.e., Amgen and Johnson Johnson go up and down completely randomly.
Pair Corralation between Amgen and Johnson Johnson
Given the investment horizon of 90 days Amgen Inc is expected to under-perform the Johnson Johnson. In addition to that, Amgen is 2.94 times more volatile than Johnson Johnson. It trades about -0.21 of its total potential returns per unit of risk. Johnson Johnson is currently generating about -0.14 per unit of volatility. If you would invest 15,933 in Johnson Johnson on August 31, 2024 and sell it today you would lose (393.00) from holding Johnson Johnson or give up 2.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amgen Inc vs. Johnson Johnson
Performance |
| Timeline |
| Amgen Inc |
| Johnson Johnson |
Amgen and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amgen and Johnson Johnson
The main advantage of trading using opposite Amgen and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amgen 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.| Amgen vs. Pfizer Inc | Amgen vs. RLJ Lodging Trust | Amgen vs. Aquagold International | Amgen vs. Stepstone Group |
| Johnson Johnson vs. Pfizer Inc | Johnson Johnson vs. RLJ Lodging Trust | Johnson Johnson vs. Aquagold International | Johnson Johnson vs. Stepstone Group |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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