Correlation Between American Express and JOHNSON

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Can any of the company-specific risk be diversified away by investing in both American Express and 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 American Express and JOHNSON into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and JOHNSON JOHNSON 2625, you can compare the effects of market volatilities on American Express and 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 American Express with a short position of JOHNSON. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and JOHNSON.

Diversification Opportunities for American Express and JOHNSON

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between American and JOHNSON is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding American Express and JOHNSON JOHNSON 2625 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JOHNSON JOHNSON 2625 and American Express 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 American Express are associated (or correlated) with 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 2625 has no effect on the direction of American Express i.e., American Express and JOHNSON go up and down completely randomly.

Pair Corralation between American Express and JOHNSON

Considering the 90-day investment horizon American Express is expected to generate 3.94 times more return on investment than JOHNSON. However, American Express is 3.94 times more volatile than JOHNSON JOHNSON 2625. It trades about 0.11 of its potential returns per unit of risk. JOHNSON JOHNSON 2625 is currently generating about -0.03 per unit of risk. If you would invest  23,593  in American Express on August 24, 2024 and sell it today you would earn a total of  5,707  from holding American Express or generate 24.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy98.4%
ValuesDaily Returns

American Express  vs.  JOHNSON JOHNSON 2625

 Performance 
       Timeline  
American Express 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, American Express reported solid returns over the last few months and may actually be approaching a breakup point.
JOHNSON JOHNSON 2625 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days JOHNSON JOHNSON 2625 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, JOHNSON is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Express and JOHNSON Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Express and JOHNSON

The main advantage of trading using opposite American Express and JOHNSON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, 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 will offset losses from the drop in JOHNSON's long position.
The idea behind American Express and JOHNSON JOHNSON 2625 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.
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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