Correlation Between Johnson Johnson and Home Depot
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and Home Depot 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 Home Depot into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and Home Depot, you can compare the effects of market volatilities on Johnson Johnson and Home Depot 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 Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and Home Depot.
Diversification Opportunities for Johnson Johnson and Home Depot
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Johnson and Home is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot 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 Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Home Depot go up and down completely randomly.
Pair Corralation between Johnson Johnson and Home Depot
Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the Home Depot. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 1.88 times less risky than Home Depot. The stock trades about -0.14 of its potential returns per unit of risk. The Home Depot is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 39,046 in Home Depot on August 31, 2024 and sell it today you would earn a total of 3,673 from holding Home Depot or generate 9.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Johnson vs. Home Depot
Performance |
| Timeline |
| Johnson Johnson |
| Home Depot |
Johnson Johnson and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Johnson and Home Depot
The main advantage of trading using opposite Johnson Johnson and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.| Johnson Johnson vs. Pfizer Inc | Johnson Johnson vs. RLJ Lodging Trust | Johnson Johnson vs. Aquagold International | Johnson Johnson vs. Stepstone Group |
| Home Depot vs. RLJ Lodging Trust | Home Depot vs. Aquagold International | Home Depot vs. Stepstone Group | Home Depot vs. Morningstar Unconstrained Allocation |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |