Correlation Between Johnson Johnson and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and Legg Mason 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 Legg Mason into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and Legg Mason Partners, you can compare the effects of market volatilities on Johnson Johnson and Legg Mason 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 Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and Legg Mason.
Diversification Opportunities for Johnson Johnson and Legg Mason
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Johnson and Legg is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Legg Mason Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Partners 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 Legg Mason. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legg Mason Partners has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Legg Mason go up and down completely randomly.
Pair Corralation between Johnson Johnson and Legg Mason
Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the Legg Mason. In addition to that, Johnson Johnson is 2.36 times more volatile than Legg Mason Partners. It trades about -0.17 of its total potential returns per unit of risk. Legg Mason Partners is currently generating about 0.14 per unit of volatility. If you would invest 1,303 in Legg Mason Partners on September 12, 2024 and sell it today you would earn a total of 13.00 from holding Legg Mason Partners or generate 1.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Johnson vs. Legg Mason Partners
Performance |
| Timeline |
| Johnson Johnson |
| Legg Mason Partners |
Johnson Johnson and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Johnson and Legg Mason
The main advantage of trading using opposite Johnson Johnson and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, Legg Mason 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 Legg Mason will offset losses from the drop in Legg Mason's long position.| Johnson Johnson vs. Victory Integrity Smallmid Cap | Johnson Johnson vs. Hilton Worldwide Holdings | Johnson Johnson vs. NVIDIA | Johnson Johnson vs. JPMorgan Chase Co |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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