Correlation Between Johnson Johnson and AstraZeneca PLC
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and AstraZeneca PLC 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 AstraZeneca PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and AstraZeneca PLC ADR, you can compare the effects of market volatilities on Johnson Johnson and AstraZeneca PLC 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 AstraZeneca PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and AstraZeneca PLC.
Diversification Opportunities for Johnson Johnson and AstraZeneca PLC
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Johnson and AstraZeneca is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and AstraZeneca PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC ADR 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 AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC ADR has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and AstraZeneca PLC go up and down completely randomly.
Pair Corralation between Johnson Johnson and AstraZeneca PLC
Considering the 90-day investment horizon Johnson Johnson is expected to generate 0.37 times more return on investment than AstraZeneca PLC. However, Johnson Johnson is 2.71 times less risky than AstraZeneca PLC. It trades about -0.21 of its potential returns per unit of risk. AstraZeneca PLC ADR is currently generating about -0.27 per unit of risk. If you would invest 16,088 in Johnson Johnson on August 26, 2024 and sell it today you would lose (571.00) from holding Johnson Johnson or give up 3.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Johnson vs. AstraZeneca PLC ADR
Performance |
| Timeline |
| Johnson Johnson |
| AstraZeneca PLC ADR |
Johnson Johnson and AstraZeneca PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Johnson and AstraZeneca PLC
The main advantage of trading using opposite Johnson Johnson and AstraZeneca PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, AstraZeneca PLC 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 AstraZeneca PLC will offset losses from the drop in AstraZeneca PLC's long position.| Johnson Johnson vs. Capricor Therapeutics | Johnson Johnson vs. Soleno Therapeutics | Johnson Johnson vs. Bio Path Holdings | Johnson Johnson vs. Moleculin Biotech |
| AstraZeneca PLC vs. Novartis AG ADR | AstraZeneca PLC vs. GlaxoSmithKline PLC ADR | AstraZeneca PLC vs. Roche Holding Ltd | AstraZeneca PLC vs. Bristol Myers Squibb |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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