Correlation Between Johnson Johnson and Procter Gamble
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and Procter Gamble 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 Procter Gamble into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and Procter Gamble, you can compare the effects of market volatilities on Johnson Johnson and Procter Gamble 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 Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and Procter Gamble.
Diversification Opportunities for Johnson Johnson and Procter Gamble
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Johnson and Procter is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble 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 Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Procter Gamble go up and down completely randomly.
Pair Corralation between Johnson Johnson and Procter Gamble
Considering the 90-day investment horizon Johnson Johnson is expected to generate 1.31 times less return on investment than Procter Gamble. But when comparing it to its historical volatility, Johnson Johnson is 1.12 times less risky than Procter Gamble. It trades about 0.06 of its potential returns per unit of risk. Procter Gamble is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 16,504 in Procter Gamble on September 2, 2024 and sell it today you would earn a total of 1,422 from holding Procter Gamble or generate 8.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Johnson vs. Procter Gamble
Performance |
| Timeline |
| Johnson Johnson |
| Procter Gamble |
Johnson Johnson and Procter Gamble Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Johnson and Procter Gamble
The main advantage of trading using opposite Johnson Johnson and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, Procter Gamble 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 Procter Gamble will offset losses from the drop in Procter Gamble's long position.| Johnson Johnson vs. Crinetics Pharmaceuticals | Johnson Johnson vs. Enanta Pharmaceuticals | Johnson Johnson vs. Amicus Therapeutics | Johnson Johnson vs. Connect Biopharma Holdings |
| Procter Gamble vs. Colgate Palmolive | Procter Gamble vs. Unilever PLC ADR | Procter Gamble vs. Kimberly Clark | Procter Gamble vs. Estee Lauder Companies |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
Other Complementary Tools
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| 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 | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data |