Correlation Between ArcelorMittal and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both ArcelorMittal 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 ArcelorMittal and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ArcelorMittal SA and Johnson Johnson, you can compare the effects of market volatilities on ArcelorMittal 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 ArcelorMittal with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of ArcelorMittal and Johnson Johnson.
Diversification Opportunities for ArcelorMittal and Johnson Johnson
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between ArcelorMittal and Johnson is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding ArcelorMittal SA and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and ArcelorMittal 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 ArcelorMittal SA 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 ArcelorMittal i.e., ArcelorMittal and Johnson Johnson go up and down completely randomly.
Pair Corralation between ArcelorMittal and Johnson Johnson
Assuming the 90 days trading horizon ArcelorMittal is expected to generate 1.53 times less return on investment than Johnson Johnson. In addition to that, ArcelorMittal is 1.46 times more volatile than Johnson Johnson. It trades about 0.05 of its total potential returns per unit of risk. Johnson Johnson is currently generating about 0.12 per unit of volatility. If you would invest 5,115 in Johnson Johnson on September 3, 2024 and sell it today you would earn a total of 1,103 from holding Johnson Johnson or generate 21.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ArcelorMittal SA vs. Johnson Johnson
Performance |
| Timeline |
| ArcelorMittal SA |
| Johnson Johnson |
ArcelorMittal and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ArcelorMittal and Johnson Johnson
The main advantage of trading using opposite ArcelorMittal and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ArcelorMittal 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.| ArcelorMittal vs. United States Steel | ArcelorMittal vs. Companhia Siderrgica Nacional | ArcelorMittal vs. Metalurgica Gerdau SA | ArcelorMittal vs. Metalurgica Gerdau SA |
| Johnson Johnson vs. Monster Beverage | Johnson Johnson vs. The Home Depot | Johnson Johnson vs. Zoom Video Communications | Johnson Johnson vs. Autohome |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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