Correlation Between Johnson Johnson and NSTAR Electric
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and NSTAR Electric 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 NSTAR Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and NSTAR Electric, you can compare the effects of market volatilities on Johnson Johnson and NSTAR Electric 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 NSTAR Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and NSTAR Electric.
Diversification Opportunities for Johnson Johnson and NSTAR Electric
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Johnson and NSTAR is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and NSTAR Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NSTAR Electric 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 NSTAR Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NSTAR Electric has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and NSTAR Electric go up and down completely randomly.
Pair Corralation between Johnson Johnson and NSTAR Electric
Considering the 90-day investment horizon Johnson Johnson is expected to generate 1.11 times less return on investment than NSTAR Electric. But when comparing it to its historical volatility, Johnson Johnson is 2.37 times less risky than NSTAR Electric. It trades about 0.04 of its potential returns per unit of risk. NSTAR Electric is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 7,726 in NSTAR Electric on November 28, 2024 and sell it today you would earn a total of 124.00 from holding NSTAR Electric or generate 1.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 26.57% |
| Values | Daily Returns |
Johnson Johnson vs. NSTAR Electric
Performance |
| Timeline |
| Johnson Johnson |
| NSTAR Electric |
Johnson Johnson and NSTAR Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Johnson and NSTAR Electric
The main advantage of trading using opposite Johnson Johnson and NSTAR Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, NSTAR Electric 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 NSTAR Electric will offset losses from the drop in NSTAR Electric's long position.| Johnson Johnson vs. Merck Company | Johnson Johnson vs. Bristol Myers Squibb | Johnson Johnson vs. Amgen Inc | Johnson Johnson vs. Pfizer Inc |
| NSTAR Electric vs. Life Time Group | NSTAR Electric vs. Arcos Dorados Holdings | NSTAR Electric vs. Alto Ingredients | NSTAR Electric vs. Griffon |
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 Stocks Directory module to find actively traded stocks across global markets.
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