Correlation Between Johnson Johnson and International Paper
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and International Paper 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 International Paper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and International Paper, you can compare the effects of market volatilities on Johnson Johnson and International Paper 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 International Paper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and International Paper.
Diversification Opportunities for Johnson Johnson and International Paper
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Johnson and International is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and International Paper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Paper 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 International Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Paper has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and International Paper go up and down completely randomly.
Pair Corralation between Johnson Johnson and International Paper
If you would invest 7,600 in International Paper on September 5, 2024 and sell it today you would earn a total of 0.00 from holding International Paper or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 40.91% |
| Values | Daily Returns |
Johnson Johnson vs. International Paper
Performance |
| Timeline |
| Johnson Johnson |
| International Paper |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Johnson Johnson and International Paper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Johnson and International Paper
The main advantage of trading using opposite Johnson Johnson and International Paper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, International Paper 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 International Paper will offset losses from the drop in International Paper's long position.| Johnson Johnson vs. Crinetics Pharmaceuticals | Johnson Johnson vs. Enanta Pharmaceuticals | Johnson Johnson vs. Amicus Therapeutics | Johnson Johnson vs. Connect Biopharma Holdings |
| International Paper vs. SunLink Health Systems | International Paper vs. Neogen | International Paper vs. Xponential Fitness | International Paper vs. Waters |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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