Correlation Between Johnson Johnson and North Peak
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and North Peak 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 North Peak into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and North Peak Resources, you can compare the effects of market volatilities on Johnson Johnson and North Peak 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 North Peak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and North Peak.
Diversification Opportunities for Johnson Johnson and North Peak
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Johnson and North is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and North Peak Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Peak Resources 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 North Peak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Peak Resources has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and North Peak go up and down completely randomly.
Pair Corralation between Johnson Johnson and North Peak
Considering the 90-day investment horizon Johnson Johnson is expected to generate 2.91 times less return on investment than North Peak. But when comparing it to its historical volatility, Johnson Johnson is 4.37 times less risky than North Peak. It trades about 0.19 of its potential returns per unit of risk. North Peak Resources is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 38.00 in North Peak Resources on November 4, 2024 and sell it today you would earn a total of 5.00 from holding North Peak Resources or generate 13.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Johnson vs. North Peak Resources
Performance |
| Timeline |
| Johnson Johnson |
| North Peak Resources |
Johnson Johnson and North Peak Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Johnson and North Peak
The main advantage of trading using opposite Johnson Johnson and North Peak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, North Peak 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 North Peak will offset losses from the drop in North Peak's long position.| Johnson Johnson vs. Merck Company | Johnson Johnson vs. Bristol Myers Squibb | Johnson Johnson vs. Amgen Inc | Johnson Johnson vs. Pfizer Inc |
| North Peak vs. Lavras Gold Corp | North Peak vs. TRU Precious Metals | North Peak vs. Orefinders Resources | North Peak vs. Nine Mile Metals |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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