Correlation Between Johnson Johnson and FORTUNE

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

Diversification Opportunities for Johnson Johnson and FORTUNE

-0.18
  Correlation Coefficient

Good diversification

The 3 months correlation between Johnson and FORTUNE is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and FORTUNE BRANDS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FORTUNE BRANDS INC 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 FORTUNE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FORTUNE BRANDS INC has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and FORTUNE go up and down completely randomly.

Pair Corralation between Johnson Johnson and FORTUNE

Considering the 90-day investment horizon Johnson Johnson is expected to generate 0.53 times more return on investment than FORTUNE. However, Johnson Johnson is 1.88 times less risky than FORTUNE. It trades about -0.12 of its potential returns per unit of risk. FORTUNE BRANDS INC is currently generating about -0.44 per unit of risk. If you would invest  15,882  in Johnson Johnson on August 30, 2024 and sell it today you would lose (342.00) from holding Johnson Johnson or give up 2.15% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy31.82%
ValuesDaily Returns

Johnson Johnson  vs.  FORTUNE BRANDS INC

 Performance 
       Timeline  
Johnson Johnson 

Risk-Adjusted Performance

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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 newest stock price chaos, may contribute to medium-term losses for the stakeholders.
FORTUNE BRANDS INC 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days FORTUNE BRANDS INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for FORTUNE BRANDS INC investors.

Johnson Johnson and FORTUNE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Johnson Johnson and FORTUNE

The main advantage of trading using opposite Johnson Johnson and FORTUNE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, FORTUNE 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 FORTUNE will offset losses from the drop in FORTUNE's long position.
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The idea behind Johnson Johnson and FORTUNE BRANDS INC 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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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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