Correlation Between Johnson Johnson and Sumitomo Chemical
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and Sumitomo Chemical 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 Sumitomo Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and Sumitomo Chemical Co, you can compare the effects of market volatilities on Johnson Johnson and Sumitomo Chemical 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 Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and Sumitomo Chemical.
Diversification Opportunities for Johnson Johnson and Sumitomo Chemical
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Johnson and Sumitomo is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Sumitomo Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical 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 Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Sumitomo Chemical go up and down completely randomly.
Pair Corralation between Johnson Johnson and Sumitomo Chemical
Considering the 90-day investment horizon Johnson Johnson is expected to generate 0.54 times more return on investment than Sumitomo Chemical. However, Johnson Johnson is 1.87 times less risky than Sumitomo Chemical. It trades about -0.01 of its potential returns per unit of risk. Sumitomo Chemical Co is currently generating about -0.04 per unit of risk. If you would invest 17,093 in Johnson Johnson on August 28, 2024 and sell it today you would lose (1,515) from holding Johnson Johnson or give up 8.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Johnson vs. Sumitomo Chemical Co
Performance |
| Timeline |
| Johnson Johnson |
| Sumitomo Chemical |
Johnson Johnson and Sumitomo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Johnson and Sumitomo Chemical
The main advantage of trading using opposite Johnson Johnson and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, Sumitomo Chemical 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 Sumitomo Chemical will offset losses from the drop in Sumitomo Chemical's long position.| Johnson Johnson vs. Capricor Therapeutics | Johnson Johnson vs. Soleno Therapeutics | Johnson Johnson vs. Bio Path Holdings | Johnson Johnson vs. Moleculin Biotech |
| Sumitomo Chemical vs. Solvay SA | Sumitomo Chemical vs. Orbia Advance | Sumitomo Chemical vs. Braskem SA Class | Sumitomo Chemical vs. Dow Inc |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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