Correlation Between Johnson Johnson and Oversea-Chinese BankingLimited
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and Oversea-Chinese BankingLimited 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 Oversea-Chinese BankingLimited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and Oversea Chinese Banking, you can compare the effects of market volatilities on Johnson Johnson and Oversea-Chinese BankingLimited 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 Oversea-Chinese BankingLimited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and Oversea-Chinese BankingLimited.
Diversification Opportunities for Johnson Johnson and Oversea-Chinese BankingLimited
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Johnson and Oversea-Chinese is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Oversea Chinese Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oversea-Chinese BankingLimited 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 Oversea-Chinese BankingLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oversea-Chinese BankingLimited has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Oversea-Chinese BankingLimited go up and down completely randomly.
Pair Corralation between Johnson Johnson and Oversea-Chinese BankingLimited
Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the Oversea-Chinese BankingLimited. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 3.74 times less risky than Oversea-Chinese BankingLimited. The stock trades about -0.14 of its potential returns per unit of risk. The Oversea Chinese Banking is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,095 in Oversea Chinese Banking on September 2, 2024 and sell it today you would earn a total of 145.00 from holding Oversea Chinese Banking or generate 13.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Johnson vs. Oversea Chinese Banking
Performance |
| Timeline |
| Johnson Johnson |
| Oversea-Chinese BankingLimited |
Johnson Johnson and Oversea-Chinese BankingLimited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Johnson and Oversea-Chinese BankingLimited
The main advantage of trading using opposite Johnson Johnson and Oversea-Chinese BankingLimited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, Oversea-Chinese BankingLimited 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 Oversea-Chinese BankingLimited will offset losses from the drop in Oversea-Chinese BankingLimited's long position.| Johnson Johnson vs. Crinetics Pharmaceuticals | Johnson Johnson vs. Enanta Pharmaceuticals | Johnson Johnson vs. Amicus Therapeutics | Johnson Johnson vs. Connect Biopharma Holdings |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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