Correlation Between Johnson Johnson and LMF Acquisition
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and LMF Acquisition 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 LMF Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and LMF Acquisition Opportunities, you can compare the effects of market volatilities on Johnson Johnson and LMF Acquisition 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 LMF Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and LMF Acquisition.
Diversification Opportunities for Johnson Johnson and LMF Acquisition
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Johnson and LMF is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and LMF Acquisition Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LMF Acquisition Oppo 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 LMF Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LMF Acquisition Oppo has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and LMF Acquisition go up and down completely randomly.
Pair Corralation between Johnson Johnson and LMF Acquisition
Considering the 90-day investment horizon Johnson Johnson is expected to generate 0.11 times more return on investment than LMF Acquisition. However, Johnson Johnson is 9.29 times less risky than LMF Acquisition. It trades about 0.46 of its potential returns per unit of risk. LMF Acquisition Opportunities is currently generating about -0.1 per unit of risk. If you would invest 15,094 in Johnson Johnson on December 2, 2024 and sell it today you would earn a total of 1,408 from holding Johnson Johnson or generate 9.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Johnson vs. LMF Acquisition Opportunities
Performance |
| Timeline |
| Johnson Johnson |
| LMF Acquisition Oppo |
Johnson Johnson and LMF Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Johnson and LMF Acquisition
The main advantage of trading using opposite Johnson Johnson and LMF Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, LMF Acquisition 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 LMF Acquisition will offset losses from the drop in LMF Acquisition's long position.| Johnson Johnson vs. Merck Company | ||
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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