Correlation Between Johnson Johnson and Sembcorp Marine
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and Sembcorp Marine 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 Sembcorp Marine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and Sembcorp Marine, you can compare the effects of market volatilities on Johnson Johnson and Sembcorp Marine 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 Sembcorp Marine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and Sembcorp Marine.
Diversification Opportunities for Johnson Johnson and Sembcorp Marine
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Johnson and Sembcorp is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Sembcorp Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sembcorp Marine 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 Sembcorp Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sembcorp Marine has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Sembcorp Marine go up and down completely randomly.
Pair Corralation between Johnson Johnson and Sembcorp Marine
Considering the 90-day investment horizon Johnson Johnson is expected to generate 10.99 times less return on investment than Sembcorp Marine. But when comparing it to its historical volatility, Johnson Johnson is 8.73 times less risky than Sembcorp Marine. It trades about 0.03 of its potential returns per unit of risk. Sembcorp Marine is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 158.00 in Sembcorp Marine on September 1, 2024 and sell it today you would lose (11.00) from holding Sembcorp Marine or give up 6.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 73.61% |
| Values | Daily Returns |
Johnson Johnson vs. Sembcorp Marine
Performance |
| Timeline |
| Johnson Johnson |
| Sembcorp Marine |
Johnson Johnson and Sembcorp Marine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Johnson and Sembcorp Marine
The main advantage of trading using opposite Johnson Johnson and Sembcorp Marine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, Sembcorp Marine 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 Sembcorp Marine will offset losses from the drop in Sembcorp Marine's long position.| Johnson Johnson vs. Crinetics Pharmaceuticals | Johnson Johnson vs. Enanta Pharmaceuticals | Johnson Johnson vs. Amicus Therapeutics | Johnson Johnson vs. Connect Biopharma Holdings |
| Sembcorp Marine vs. Austal Limited | Sembcorp Marine vs. Rolls Royce Holdings PLC | Sembcorp Marine vs. AAR Corp | Sembcorp Marine vs. Eve Holding |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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