Correlation Between Johnson Johnson and NIKE
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and NIKE 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 Johnson Johnson and NIKE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson Co and NIKE Inc, you can compare the effects of market volatilities on Johnson Johnson and NIKE 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 Johnson Johnson with a short position of NIKE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and NIKE.
Diversification Opportunities for Johnson Johnson and NIKE
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Johnson and NIKE is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson Co and NIKE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIKE Inc and Johnson Johnson 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 Johnson Johnson Co are associated (or correlated) with NIKE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIKE Inc has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and NIKE go up and down completely randomly.
Pair Corralation between Johnson Johnson and NIKE
Assuming the 90 days trading horizon Johnson Johnson Co is expected to generate 1.05 times more return on investment than NIKE. However, Johnson Johnson is 1.05 times more volatile than NIKE Inc. It trades about -0.02 of its potential returns per unit of risk. NIKE Inc is currently generating about -0.07 per unit of risk. If you would invest 1,207,700 in Johnson Johnson Co on September 19, 2024 and sell it today you would lose (87,700) from holding Johnson Johnson Co or give up 7.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Johnson Co vs. NIKE Inc
Performance |
| Timeline |
| Johnson Johnson |
| NIKE Inc |
Johnson Johnson and NIKE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Johnson and NIKE
The main advantage of trading using opposite Johnson Johnson and NIKE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, NIKE 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 NIKE will offset losses from the drop in NIKE's long position.| Johnson Johnson vs. Edesa Holding SA | Johnson Johnson vs. Vista Energy, SAB | Johnson Johnson vs. United States Steel | Johnson Johnson vs. Central Puerto SA |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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