Correlation Between Johnson Johnson and Capital One
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson and Capital One 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 Capital One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and Capital One Financial, you can compare the effects of market volatilities on Johnson Johnson and Capital One 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 Capital One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and Capital One.
Diversification Opportunities for Johnson Johnson and Capital One
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Johnson and Capital is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial 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 Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of Johnson Johnson i.e., Johnson Johnson and Capital One go up and down completely randomly.
Pair Corralation between Johnson Johnson and Capital One
Assuming the 90 days trading horizon Johnson Johnson is expected to generate 13.35 times less return on investment than Capital One. But when comparing it to its historical volatility, Johnson Johnson is 1.64 times less risky than Capital One. It trades about 0.01 of its potential returns per unit of risk. Capital One Financial is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 23,771 in Capital One Financial on September 12, 2024 and sell it today you would earn a total of 33,001 from holding Capital One Financial or generate 138.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.8% |
| Values | Daily Returns |
Johnson Johnson vs. Capital One Financial
Performance |
| Timeline |
| Johnson Johnson |
| Capital One Financial |
Johnson Johnson and Capital One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Johnson Johnson and Capital One
The main advantage of trading using opposite Johnson Johnson and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson position performs unexpectedly, Capital One 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 Capital One will offset losses from the drop in Capital One's long position.| Johnson Johnson vs. AbbVie Inc | Johnson Johnson vs. Bristol Myers Squibb | Johnson Johnson vs. Gilead Sciences | Johnson Johnson vs. Biogen Inc |
| Capital One vs. PayPal Holdings | Capital One vs. Credit Acceptance | Capital One vs. Bread Financial Holdings | Capital One vs. Financeira Alfa SA |
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 CEOs Directory module to screen CEOs from public companies around the world.
Other Complementary Tools
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum |