Correlation Between Johnson Johnson and ALLTEL

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Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and ALLTEL 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 ALLTEL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and ALLTEL P 68, you can compare the effects of market volatilities on Johnson Johnson and ALLTEL 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 ALLTEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and ALLTEL.

Diversification Opportunities for Johnson Johnson and ALLTEL

-0.49
  Correlation Coefficient

Very good diversification

The 3 months correlation between Johnson and ALLTEL is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and ALLTEL P 68 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALLTEL P 68 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 ALLTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALLTEL P 68 has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and ALLTEL go up and down completely randomly.

Pair Corralation between Johnson Johnson and ALLTEL

Considering the 90-day investment horizon Johnson Johnson is expected to generate 2.34 times more return on investment than ALLTEL. However, Johnson Johnson is 2.34 times more volatile than ALLTEL P 68. It trades about 0.23 of its potential returns per unit of risk. ALLTEL P 68 is currently generating about 0.3 per unit of risk. If you would invest  14,366  in Johnson Johnson on November 7, 2024 and sell it today you would earn a total of  983.00  from holding Johnson Johnson or generate 6.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy25.0%
ValuesDaily Returns

Johnson Johnson  vs.  ALLTEL P 68

 Performance 
       Timeline  
Johnson Johnson 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Johnson Johnson has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Johnson Johnson is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.
ALLTEL P 68 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ALLTEL P 68 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ALLTEL is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Johnson Johnson and ALLTEL Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Johnson Johnson and ALLTEL

The main advantage of trading using opposite Johnson Johnson and ALLTEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, ALLTEL 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 ALLTEL will offset losses from the drop in ALLTEL's long position.
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The idea behind Johnson Johnson and ALLTEL P 68 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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