Correlation Between Johnson Johnson and Active Health
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and Active Health 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 Active Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and Active Health Foods, you can compare the effects of market volatilities on Johnson Johnson and Active Health 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 Active Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and Active Health.
Diversification Opportunities for Johnson Johnson and Active Health
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Johnson and Active is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Active Health Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Active Health Foods 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 Active Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Active Health Foods has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Active Health go up and down completely randomly.
Pair Corralation between Johnson Johnson and Active Health
Considering the 90-day investment horizon Johnson Johnson is expected to generate 42.95 times less return on investment than Active Health. But when comparing it to its historical volatility, Johnson Johnson is 32.87 times less risky than Active Health. It trades about 0.03 of its potential returns per unit of risk. Active Health Foods is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 0.01 in Active Health Foods on August 26, 2024 and sell it today you would earn a total of 0.00 from holding Active Health Foods or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Johnson Johnson vs. Active Health Foods
Performance |
| Timeline |
| Johnson Johnson |
| Active Health Foods |
Johnson Johnson and Active Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Johnson and Active Health
The main advantage of trading using opposite Johnson Johnson and Active Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, Active Health 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 Active Health will offset losses from the drop in Active Health's long position.| Johnson Johnson vs. Capricor Therapeutics | Johnson Johnson vs. Akari Therapeutics PLC | Johnson Johnson vs. Soleno Therapeutics | Johnson Johnson vs. Bio Path Holdings |
| Active Health vs. Ventana Biotech | Active Health vs. Gold Ent Group | Active Health vs. Profitable Develop | Active Health vs. American Leisure Holdings |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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