Correlation Between Johnson Johnson and California Resources
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and California Resources 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 California Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and California Resources, you can compare the effects of market volatilities on Johnson Johnson and California Resources 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 California Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and California Resources.
Diversification Opportunities for Johnson Johnson and California Resources
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Johnson and California is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and California Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California 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 California Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Resources has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and California Resources go up and down completely randomly.
Pair Corralation between Johnson Johnson and California Resources
Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the California Resources. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 8.9 times less risky than California Resources. The stock trades about -0.13 of its potential returns per unit of risk. The California Resources is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,470 in California Resources on September 2, 2024 and sell it today you would earn a total of 242.00 from holding California Resources or generate 16.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 60.94% |
| Values | Daily Returns |
Johnson Johnson vs. California Resources
Performance |
| Timeline |
| Johnson Johnson |
| California Resources |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
Johnson Johnson and California Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Johnson and California Resources
The main advantage of trading using opposite Johnson Johnson and California Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, California Resources 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 California Resources will offset losses from the drop in California Resources' long position.| Johnson Johnson vs. Crinetics Pharmaceuticals | Johnson Johnson vs. Enanta Pharmaceuticals | Johnson Johnson vs. Amicus Therapeutics | Johnson Johnson vs. Connect Biopharma Holdings |
| California Resources vs. Cardinal Energy | California Resources vs. Spartan Delta Corp | California Resources vs. Delek Group | California Resources vs. Bonterra Energy Corp |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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