Correlation Between Johnson Johnson and TCL Electronics
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and TCL Electronics 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 TCL Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and TCL Electronics Holdings, you can compare the effects of market volatilities on Johnson Johnson and TCL Electronics 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 TCL Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and TCL Electronics.
Diversification Opportunities for Johnson Johnson and TCL Electronics
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Johnson and TCL is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and TCL Electronics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TCL Electronics Holdings 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 TCL Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TCL Electronics Holdings has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and TCL Electronics go up and down completely randomly.
Pair Corralation between Johnson Johnson and TCL Electronics
Considering the 90-day investment horizon Johnson Johnson is expected to under-perform the TCL Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Johnson Johnson is 5.35 times less risky than TCL Electronics. The stock trades about -0.33 of its potential returns per unit of risk. The TCL Electronics Holdings is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 71.00 in TCL Electronics Holdings on August 24, 2024 and sell it today you would lose (4.00) from holding TCL Electronics Holdings or give up 5.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Johnson Johnson vs. TCL Electronics Holdings
Performance |
| Timeline |
| Johnson Johnson |
| TCL Electronics Holdings |
Johnson Johnson and TCL Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Johnson and TCL Electronics
The main advantage of trading using opposite Johnson Johnson and TCL Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, TCL Electronics 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 TCL Electronics will offset losses from the drop in TCL Electronics' long position.| Johnson Johnson vs. Merck Company | Johnson Johnson vs. Pfizer Inc | Johnson Johnson vs. Small Cap Core | Johnson Johnson vs. Freedom Holding Corp |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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