Correlation Between Johnson Johnson and Goldman Sachs
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and Goldman Sachs 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 Goldman Sachs into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and Goldman Sachs ActiveBeta, you can compare the effects of market volatilities on Johnson Johnson and Goldman Sachs 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 Goldman Sachs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and Goldman Sachs.
Diversification Opportunities for Johnson Johnson and Goldman Sachs
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Johnson and Goldman is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Goldman Sachs ActiveBeta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs ActiveBeta 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs ActiveBeta has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Goldman Sachs go up and down completely randomly.
Pair Corralation between Johnson Johnson and Goldman Sachs
Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the Goldman Sachs. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 1.7 times less risky than Goldman Sachs. The stock trades about -0.07 of its potential returns per unit of risk. The Goldman Sachs ActiveBeta is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 6,854 in Goldman Sachs ActiveBeta on August 29, 2024 and sell it today you would earn a total of 717.00 from holding Goldman Sachs ActiveBeta or generate 10.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Johnson vs. Goldman Sachs ActiveBeta
Performance |
| Timeline |
| Johnson Johnson |
| Goldman Sachs ActiveBeta |
Johnson Johnson and Goldman Sachs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Johnson and Goldman Sachs
The main advantage of trading using opposite Johnson Johnson and Goldman Sachs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, Goldman Sachs 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 Goldman Sachs will offset losses from the drop in Goldman Sachs' long position.| Johnson Johnson vs. Merck Company | Johnson Johnson vs. Pharvaris BV | Johnson Johnson vs. Brinker International | Johnson Johnson vs. Alcoa Corp |
| Goldman Sachs vs. Vanguard Mid Cap Index | Goldman Sachs vs. Vanguard Small Cap Value | Goldman Sachs vs. Vanguard FTSE Emerging | Goldman Sachs vs. Vanguard Large Cap Index |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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