Correlation Between Johnson Johnson and China Merchants
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and China Merchants 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 China Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and China Merchants Bank, you can compare the effects of market volatilities on Johnson Johnson and China Merchants 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 China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and China Merchants.
Diversification Opportunities for Johnson Johnson and China Merchants
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Johnson and China is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and China Merchants Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Merchants Bank 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 China Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Merchants Bank has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and China Merchants go up and down completely randomly.
Pair Corralation between Johnson Johnson and China Merchants
Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the China Merchants. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 2.59 times less risky than China Merchants. The stock trades about -0.01 of its potential returns per unit of risk. The China Merchants Bank is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,344 in China Merchants Bank on August 27, 2024 and sell it today you would lose (104.00) from holding China Merchants Bank or give up 4.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Johnson vs. China Merchants Bank
Performance |
| Timeline |
| Johnson Johnson |
| China Merchants Bank |
Johnson Johnson and China Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Johnson and China Merchants
The main advantage of trading using opposite Johnson Johnson and China Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, China Merchants 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 China Merchants will offset losses from the drop in China Merchants' long position.| Johnson Johnson vs. Capricor Therapeutics | Johnson Johnson vs. Soleno Therapeutics | Johnson Johnson vs. Bio Path Holdings | Johnson Johnson vs. Moleculin Biotech |
| China Merchants vs. China Everbright Bank | China Merchants vs. China Merchants Bank | China Merchants vs. Postal Savings Bank | China Merchants vs. China Citic Bank |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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