Correlation Between AstraZeneca PLC and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both AstraZeneca PLC 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 AstraZeneca PLC and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AstraZeneca PLC and Johnson Johnson, you can compare the effects of market volatilities on AstraZeneca PLC 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 AstraZeneca PLC with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of AstraZeneca PLC and Johnson Johnson.
Diversification Opportunities for AstraZeneca PLC and Johnson Johnson
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AstraZeneca and Johnson is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding AstraZeneca PLC and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and AstraZeneca PLC 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 AstraZeneca PLC 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 AstraZeneca PLC i.e., AstraZeneca PLC and Johnson Johnson go up and down completely randomly.
Pair Corralation between AstraZeneca PLC and Johnson Johnson
Assuming the 90 days trading horizon AstraZeneca PLC is expected to generate 1.37 times more return on investment than Johnson Johnson. However, AstraZeneca PLC is 1.37 times more volatile than Johnson Johnson. It trades about 0.01 of its potential returns per unit of risk. Johnson Johnson is currently generating about 0.01 per unit of risk. If you would invest 132,447 in AstraZeneca PLC on September 2, 2024 and sell it today you would earn a total of 5,903 from holding AstraZeneca PLC or generate 4.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
AstraZeneca PLC vs. Johnson Johnson
Performance |
| Timeline |
| AstraZeneca PLC |
| Johnson Johnson |
AstraZeneca PLC and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AstraZeneca PLC and Johnson Johnson
The main advantage of trading using opposite AstraZeneca PLC and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AstraZeneca PLC 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.| AstraZeneca PLC vs. Johnson Johnson | AstraZeneca PLC vs. Pfizer Inc | AstraZeneca PLC vs. GlaxoSmithKline plc |
| Johnson Johnson vs. Deutsche Bank Aktiengesellschaft | Johnson Johnson vs. Genworth Financial | Johnson Johnson vs. Grupo Sports World | Johnson Johnson vs. McEwen Mining |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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