Correlation Between Coca Cola and Johnson Johnson
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Johnson Johnson 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 Coca Cola and Johnson Johnson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Coca Cola and Johnson Johnson, you can compare the effects of market volatilities on Coca Cola and Johnson Johnson 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 Coca Cola with a short position of Johnson Johnson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Johnson Johnson.
Diversification Opportunities for Coca Cola and Johnson Johnson
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Coca and Johnson is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Johnson Johnson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Johnson and Coca Cola 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 The Coca Cola are associated (or correlated) with Johnson Johnson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Johnson has no effect on the direction of Coca Cola i.e., Coca Cola and Johnson Johnson go up and down completely randomly.
Pair Corralation between Coca Cola and Johnson Johnson
Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.82 times more return on investment than Johnson Johnson. However, The Coca Cola is 1.22 times less risky than Johnson Johnson. It trades about 0.04 of its potential returns per unit of risk. Johnson Johnson is currently generating about 0.01 per unit of risk. If you would invest 5,608 in The Coca Cola on September 1, 2024 and sell it today you would earn a total of 800.00 from holding The Coca Cola or generate 14.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. Johnson Johnson
Performance |
| Timeline |
| Coca Cola |
| Johnson Johnson |
Coca Cola and Johnson Johnson Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Johnson Johnson
The main advantage of trading using opposite Coca Cola and Johnson Johnson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Johnson Johnson 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 Johnson Johnson will offset losses from the drop in Johnson Johnson's long position.| Coca Cola vs. Coca Cola Femsa SAB | Coca Cola vs. Embotelladora Andina SA | Coca Cola vs. National Beverage Corp | Coca Cola vs. Embotelladora Andina SA |
| Johnson Johnson vs. Crinetics Pharmaceuticals | Johnson Johnson vs. Enanta Pharmaceuticals | Johnson Johnson vs. Amicus Therapeutics | Johnson Johnson vs. Connect Biopharma Holdings |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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