Correlation Between GM and JOHNSON
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By analyzing existing cross correlation between General Motors and JOHNSON JOHNSON, you can compare the effects of market volatilities on GM 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 GM with a short position of JOHNSON. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and JOHNSON.
Diversification Opportunities for GM and JOHNSON
Very good diversification
The 3 months correlation between GM and JOHNSON is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and JOHNSON JOHNSON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JOHNSON JOHNSON and GM 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 General Motors 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 has no effect on the direction of GM i.e., GM and JOHNSON go up and down completely randomly.
Pair Corralation between GM and JOHNSON
Allowing for the 90-day total investment horizon General Motors is expected to generate 1.3 times more return on investment than JOHNSON. However, GM is 1.3 times more volatile than JOHNSON JOHNSON. It trades about 0.26 of its potential returns per unit of risk. JOHNSON JOHNSON is currently generating about -0.22 per unit of risk. If you would invest 5,273 in General Motors on August 27, 2024 and sell it today you would earn a total of 580.00 from holding General Motors or generate 11.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
General Motors vs. JOHNSON JOHNSON
Performance |
| Timeline |
| General Motors |
| JOHNSON JOHNSON |
GM and JOHNSON Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and JOHNSON
The main advantage of trading using opposite GM and JOHNSON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors and JOHNSON JOHNSON 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.| JOHNSON vs. Nike Inc | JOHNSON vs. Bright Scholar Education | JOHNSON vs. Saia Inc | JOHNSON vs. Lakeland Industries |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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