Correlation Between ESSA Pharma and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both ESSA Pharma 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 ESSA Pharma and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESSA Pharma and Johnson Johnson, you can compare the effects of market volatilities on ESSA Pharma 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 ESSA Pharma with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESSA Pharma and Johnson Johnson.
Diversification Opportunities for ESSA Pharma and Johnson Johnson
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ESSA and Johnson is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Pharma and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and ESSA Pharma 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 ESSA Pharma 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 ESSA Pharma i.e., ESSA Pharma and Johnson Johnson go up and down completely randomly.
Pair Corralation between ESSA Pharma and Johnson Johnson
Given the investment horizon of 90 days ESSA Pharma is expected to generate 2.54 times more return on investment than Johnson Johnson. However, ESSA Pharma is 2.54 times more volatile than Johnson Johnson. It trades about 0.12 of its potential returns per unit of risk. Johnson Johnson is currently generating about -0.13 per unit of risk. If you would invest 164.00 in ESSA Pharma on October 13, 2024 and sell it today you would earn a total of 10.00 from holding ESSA Pharma or generate 6.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ESSA Pharma vs. Johnson Johnson
Performance |
| Timeline |
| ESSA Pharma |
| Johnson Johnson |
ESSA Pharma and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESSA Pharma and Johnson Johnson
The main advantage of trading using opposite ESSA Pharma and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Pharma 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.| ESSA Pharma vs. Summit Therapeutics PLC | ESSA Pharma vs. Avenue Therapeutics | ESSA Pharma vs. Spero Therapeutics |
| Johnson Johnson vs. Merck Company | Johnson Johnson vs. Bristol Myers Squibb | Johnson Johnson vs. Amgen Inc | Johnson Johnson vs. Pfizer Inc |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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