Correlation Between Johnson Johnson and GigaMedia
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and GigaMedia 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 GigaMedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and GigaMedia, you can compare the effects of market volatilities on Johnson Johnson and GigaMedia 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 GigaMedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and GigaMedia.
Diversification Opportunities for Johnson Johnson and GigaMedia
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Johnson and GigaMedia is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia 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 are associated (or correlated) with GigaMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GigaMedia has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and GigaMedia go up and down completely randomly.
Pair Corralation between Johnson Johnson and GigaMedia
Assuming the 90 days trading horizon Johnson Johnson is expected to under-perform the GigaMedia. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 1.48 times less risky than GigaMedia. The stock trades about -0.01 of its potential returns per unit of risk. The GigaMedia is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 104.00 in GigaMedia on September 4, 2024 and sell it today you would earn a total of 30.00 from holding GigaMedia or generate 28.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Johnson vs. GigaMedia
Performance |
| Timeline |
| Johnson Johnson |
| GigaMedia |
Johnson Johnson and GigaMedia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Johnson and GigaMedia
The main advantage of trading using opposite Johnson Johnson and GigaMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, GigaMedia 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 GigaMedia will offset losses from the drop in GigaMedia's long position.| Johnson Johnson vs. URBAN OUTFITTERS | Johnson Johnson vs. American Eagle Outfitters | Johnson Johnson vs. Granite Construction | Johnson Johnson vs. NISSIN FOODS HLDGS |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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