Correlation Between Merck and JOHNSON
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By analyzing existing cross correlation between Merck Company and JOHNSON JOHNSON, you can compare the effects of market volatilities on Merck and 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 Merck with a short position of JOHNSON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and JOHNSON.
Diversification Opportunities for Merck and JOHNSON
Poor diversification
The 3 months correlation between Merck and JOHNSON is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and JOHNSON JOHNSON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JOHNSON JOHNSON and Merck 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 Merck Company are associated (or correlated) with 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 Merck i.e., Merck and JOHNSON go up and down completely randomly.
Pair Corralation between Merck and JOHNSON
Considering the 90-day investment horizon Merck Company is expected to under-perform the JOHNSON. In addition to that, Merck is 1.15 times more volatile than JOHNSON JOHNSON. It trades about -0.01 of its total potential returns per unit of risk. JOHNSON JOHNSON is currently generating about 0.08 per unit of volatility. If you would invest 5,720 in JOHNSON JOHNSON on August 30, 2024 and sell it today you would earn a total of 97.00 from holding JOHNSON JOHNSON or generate 1.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 86.96% |
| Values | Daily Returns |
Merck Company vs. JOHNSON JOHNSON
Performance |
| Timeline |
| Merck Company |
| JOHNSON JOHNSON |
Merck and JOHNSON Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and JOHNSON
The main advantage of trading using opposite Merck and JOHNSON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, 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 will offset losses from the drop in JOHNSON's long position.| Merck vs. Emergent Biosolutions | Merck vs. Bausch Health Companies | Merck vs. Neurocrine Biosciences | Merck vs. Teva Pharma Industries |
| JOHNSON vs. AEP TEX INC | JOHNSON vs. US BANK NATIONAL | JOHNSON vs. Nasdaq Inc | JOHNSON vs. Vertiv Holdings Co |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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