Correlation Between Johnson Johnson and Green Battery
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and Green Battery 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 Green Battery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and Green Battery Minerals, you can compare the effects of market volatilities on Johnson Johnson and Green Battery 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 Green Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and Green Battery.
Diversification Opportunities for Johnson Johnson and Green Battery
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Johnson and Green is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Green Battery Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Battery Minerals 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 Green Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Battery Minerals has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Green Battery go up and down completely randomly.
Pair Corralation between Johnson Johnson and Green Battery
Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the Green Battery. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 13.29 times less risky than Green Battery. The stock trades about -0.17 of its potential returns per unit of risk. The Green Battery Minerals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 5.50 in Green Battery Minerals on September 12, 2024 and sell it today you would lose (0.47) from holding Green Battery Minerals or give up 8.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Johnson Johnson vs. Green Battery Minerals
Performance |
| Timeline |
| Johnson Johnson |
| Green Battery Minerals |
Johnson Johnson and Green Battery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Johnson and Green Battery
The main advantage of trading using opposite Johnson Johnson and Green Battery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, Green Battery 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 Green Battery will offset losses from the drop in Green Battery's long position.| Johnson Johnson vs. Victory Integrity Smallmid Cap | Johnson Johnson vs. Hilton Worldwide Holdings | Johnson Johnson vs. NVIDIA | Johnson Johnson vs. JPMorgan Chase Co |
| Green Battery vs. Qubec Nickel Corp | Green Battery vs. IGO Limited | Green Battery vs. Focus Graphite | Green Battery vs. Mineral Res |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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